Glenridge Pharmaceuticals LLC v. Questcor Pharmaceuticals, Inc

Case Name:    Glenridge Pharmaceuticals LLC v. Questcor Pharmaceuticals, Inc.

Case No.:        1-11-CV-203554

Date:               October 21, 2014

Time:              9:00 a.m.

Dept:               8

Currently before the Court is the motion for judgment on the pleadings of defendants Glenridge Pharmaceuticals LLC (“Glenridge”), Kenneth Greathouse (“Greathouse”), Stuart Rose (“Rose”), and Lloyd Glenn (“Glenn”) (collectively, the “Glenridge Defendants”) as to the first amended complaint (“FAC”) of plaintiff Questcor Pharmaceuticals, Inc. (“Questcor”). The Glenridge Defendants move for judgment on the pleadings as to the first cause of action for declaratory relief on the ground of failure to state facts sufficient to constitute a cause of action. (See Code Civ. Proc., § 438, subd. (c)(1)(B)(ii).) Glenn moves for judgment on the pleadings as to the third cause of action for aiding and abetting breach of fiduciary duty on the ground of failure to state facts sufficient to constitute a cause of action. (See Code Civ. Proc., § 438, subd. (c)(1)(B)(ii).)

Request for Judicial Notice

 

The Glenridge Defendants ask the Court to take judicial notice of the following: (A) Questcor’s motion for summary adjudication filed November 14, 2013; (B) the proposed order granting Questcor’s motion for summary adjudication; and (C) the Court’s March 6, 2014 order denying the motion for summary adjudication.

 

Pursuant to Evidence Code section 452, subdivision (d), a trial court may properly take judicial notice of the records of any state or federal court. A court may take judicial notice of the existence of each document in a court file, but can only take judicial notice of the truth of facts asserted in documents such as orders, findings of fact and conclusions of law, and judgments. (See Day v. Sharp (1975) 50 Cal.App.3d 904, 914.) Exhibits A-C are court records of a state court and are therefore subject to judicial notice. Accordingly, the request for judicial notice as to these documents is GRANTED.

The First Cause of Action for Declaratory Relief

 

The Glenridge Defendants contend that Questcor cannot state a claim for declaratory relief. It reasons that Questcor judicially admitted that the sole basis for its cause of action is Corporations Code section 310. As the Court (Hon. Carol Overton) previously held in its March 6, 2014 order that Corporations Code section 310 does not apply to the present action, the Glenridge Defendants conclude that the motion for judgment on the pleadings should be granted as to this cause of action without leave to amend. In opposition, Questcor argues that its cause of action for declaratory relief is premised on both the common law and Corporations Code section 310. It further claims that its motion for summary adjudication does not constitute a judicial admission. Questcor’s arguments are persuasive.

 

Here, Questcor’s motion for summary adjudication is not a pleading, stipulation or a response to a request for admission and, therefore Questcor did not judicially admit that the sole basis for its cause of action is Corporations Code section 310. (See Myers v. Trendwest Resorts, Inc. (2009) 178 Cal.App.4th 735, 746-747 [motion for summary judgment does not constitute a pleading for purposes of judicial admission].) Since the motion for judgment on the pleadings is directed only to a portion of the cause of action (Corporations Code section 310), the motion does not lie. (Kong v. City of Hawaiian Gardens Redevelop. Agency (2003) 108 Cal.App.4th 1028, 1047; see also PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682-1683 [motion to strike used to challenge portion of cause of action].)

 

In their reply, the Glenridge Defendants argue that Questcor cannot state a cause of action for declaratory relief in any case because a contract in which an officer has an interest is not ipso facto void. In this regard, they rely on Chase v. Super-Cold Corp. (1958) 163 Cal.App.2d 83, 87-88 for the proposition that a fiduciary may take part in transactions in which he has an interest adverse to the corporation. The Glenridge Defendants’ reliance on this case is misplaced. In the ensuing page, the Chase Court goes on to state that a fiduciary cannot leave it to others to protect the corporation while he drives a hard and unfair bargain by using his influence or bargaining skill for himself, and must account for any unfair profits made or received in disregard of his duty. (Id. at p. 88.)

 

Here, Questcor alleges that Greathouse was secretly involved in the negotiations behind the scenes on behalf of Glenridge, while simultaneously making recommendations to Questcor on how to respond to Glenridge’s proposals. (FAC, ¶ 36.) It further alleges that Greathouse drove an unfair bargain by using his influence to convince Questcor to acquiesce to a royalty in perpetuity, rather than the seven-year royalty standard in the industry. (FAC, ¶¶ 39-41.) Thus, Questcor alleges facts indicating that Greathouse abdicated his fiduciary duty and drove a hard and unfair bargain for his own benefit.

 

In any case, “‘a complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the court. If these requirements are met and no basis for declining declaratory relief appears, the court should declare the rights of the parties whether or not the facts alleged establish that the plaintiff is entitled to favorable declaration.’” (Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 606; see Alameda County Land Use Assn. v. City of Hayward (1995) 38 Cal.App.4th 1716, 1722 [if factual allegations “reveal an actual controversy exists between the parties, the complaint is legally sufficient for declaratory relief”].) As Questcor alleges facts indicating that an actual controversy exists concerning whether the royalty agreement is void or voidable (FAC, ¶ 48), the first cause of action is legally sufficient.

 

In light of the foregoing, the motion for judgment on the pleadings as to the first cause of action for declaratory relief is DENIED.

The Third Cause of Action for Aiding and Abetting Breach of Fiduciary Duty

 

Glenn contends that Questcor fails to state a cause of action for aiding and abetting a breach of fiduciary duty because its allegations are merely conclusory. In this regard, Glenn principally relies on Casey v. U.S, Bank, N.A. (2005) 127 Cal.App.4th 1138 for the proposition that conclusory allegations are insufficient to allege aiding and abetting a breach of fiduciary duty.

 

As an initial matter, Glenn’s reliance on Casey is misplaced. In Casey, supra, the Court of Appeal articulated a heightened standard of pleading in the context of a claim against a bank for aiding and abetting a customer’s wrongdoing. (Id. at p. 1152.) The Court reasoned that a strict pleading standard was necessary to reconcile the legal principle that a bank owes no duty to police a customer’s wrongdoing with the corresponding principle that extends tort liability to anyone who knowingly aids and abets the tort of another. (Id. at pp. 1152-1153.) Thus, the pleading standard in Casey, supra, is limited to the context of a claim against a bank for aiding and abetting a customer’s wrongdoing.

 

In any case, Questcor alleges sufficient facts to meet the pleading standard elucidated in Casey, supra. Casey required that the plaintiff allege that the defendant actually knew of the specific primary wrong – the underlying tort – that the defendant intentionally aided. (Id. at p. 1145.) Glenn argues that Questcor’s cause of action does not meet this standard because it does not allege that Glenn knew of Greathouse’s misrepresentation concerning his participation in the negotiations for the royalty. Glenn reasons that the misrepresentation is the underlying tort and that as Questcor fails to plead Glenn’s knowledge of this misrepresentation, the motion for judgment on the pleadings should be granted. This argument is not persuasive. Questcor alleges that Greathouse breached his fiduciary duty by engaging in a self-dealing transaction, in addition to misrepresenting his participation in the negotiations. (FAC, ¶ 53.) Thus, the underlying tort for the purposes of aiding and abetting breach of fiduciary duty is the participation in the self-dealing transaction itself. As Questcor alleges that Glenn knew that Greathouse breached his fiduciary duty by engaging in a self-dealing transaction (FAC, ¶¶ 57-58), Questcor alleges facts indicating that Glenn had actual knowledge of Greathouse’s wrongdoing. Thus, Questcor states sufficient facts to allege a cause of action for aiding and abetting breach of fiduciary duty.

 

In light of the foregoing, the motion for judgment on the pleadings as to the third cause of action for aiding and abetting breach of fiduciary duty is DENIED.

 

 

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