CSPC Dophen Corp. v. Hu

CSPC DOPHEN CORPORATION, Plaintiff, v. ZHIXIANG HU, Defendant.

No. 2:17-cv-1895 MCE DB PS

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

July 20, 2020

ORDER AND FINDINGS AND RECOMMENDATIONS

Defendant and counterclaimant, Dr. Zhixiang Hu, Ph.D., ("Dr. Hu"), is proceeding in this matter pro se. (ECF No. 68.) Accordingly, this action has been referred to the undersigned pursuant to Local Rule 302(c)(21) and 28 U.S.C. § 636(b)(1). Pending before the undersigned are Dr. Hu's motion for leave for alternative service of process, plaintiff CSCP Dophen Corporation's partial motion to dismiss Dr. Hu's second amended counterclaim, and counter-defendant CSPC Pharmaceutical Group Limited's motion to dismiss. (ECF Nos. 218, 227, 236.)

For the reasons explained below, Dr. Hu's motion for leave for alternative service of process is granted. Also, the undersigned recommends that the motions to dismiss be granted without further leave to amend.

BACKGROUND

Plaintiff CSPC Dophen Corporation, ("CSPC Dophen"), commenced this action on September 11, 2017. (ECF No. 1.) Plaintiff filed a third amended complaint on May 7, 2019. (ECF No. 190.) Therein, plaintiff alleges that CSPC Dophen is a pharmaceutical and development company based in Sacramento, California. (Third Am. Compl. (ECF No. 190) at 2.¹) Plaintiff hired defendant Dr. Hu in October of 2011, as Director of CSPC Dophen's Research Laboratory. (Id. at 3.) Dr. Hu signed a Non-Disclosure Agreement and a Policy of Conflict of Interest as part of that employment. (Id. at 3-4.)

However, on April 24, 2014, Dr. Hu incorporated a competing entity named Dophen Biomed, Inc., with the same address as CSPC Dophen. (Id. at 4.) Dr. Hu also established a bank account and deposited plaintiff's money into that account. (Id. at 5.) And in April of 2017, Dr. Hu filed an Investigational New Drug application with the Food and Drug Administration ("FDA") using plaintiff's name without plaintiff's consent. (Id.) Plaintiff terminated Dr. Hu's employment on July 21, 2017. (Id. at 6.)

Based on these allegations the third amended complaint asserts causes of action for breach of contract, breach of the duty of loyalty, violation of the Defend Trade Secrets Act, 18 U.S.C. § 1832(a)(1), violation of the Lanham Act, 15 U.S.C. § 1125(a), conversion, violation of the California Comprehensive Computer Data Access and Fraud Act, California Penal Code § 502, unfair competition, and defamation. (Id. at 7-16.)

On November 24, 2019, Dr. Hu filed a motion seeking leave for alternative service of process on several counter defendants. (ECF No. 218.) On December 6, 2019, Dr. Hu filed a motion for a seven-day extension of time to file a second amended counterclaim.² (ECF No. 223.) Dr. Hu filed a second amended counterclaim on December 10, 2019. (ECF No. 224.)

On December 23, 2019, plaintiff filed a partial motion to dismiss pursuant to Rule 12(6) and to strike pursuant to Rule 12(f) of the Federal Rules of Civil Procedure. (ECF No. 227.) On January 10, 2020, Dr. Hu filed an opposition to the motion to dismiss and plaintiff filed an opposition to Dr. Hu's motion for leave for alternative service of process on the counter-

////defendants. (ECF Nos. 230 & 231.) The parties filed replies on January 17, 2020. (ECF Nos. 232 & 234.)

On January 21, 2020, counter-defendant CSPC Pharmaceutical Group Limited, ("CSPC Limited"), filed a motion to dismiss for lack of jurisdiction pursuant to Rule 12(b)(2). (ECF No. 236.) Dr. Hu filed an opposition on February 28, 2020. (ECF No. 249.) CSPC Limited filed a reply on March 6, 2020. (ECF No. 251.)

STANDARDS

I. Legal Standards Applicable to Motions to Dismiss Pursuant to Rule 12(b)(2)

Federal Rule of Civil Procedure 12(b)(2) provides that "[a] defendant may move, prior to trial, to dismiss the complaint for lack of personal jurisdiction." Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1285 (9th Cir. 1977). "Where a defendant moves to dismiss a complaint for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that jurisdiction is appropriate." Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). However, "in the absence of an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts." Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990).

II. Legal Standards Applicable to Motions to Dismiss Pursuant to Rule 12(b)(6)

The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal sufficiency of the complaint. N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). "The rule applies equally to a counterclaim." Hana Financial, Inc. v. Hana Bank, 500 F.Supp.2d 1228, 1232 (C.D. Cal. 2007). "Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A party is required to allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

//// In determining whether a counterclaim states a claim on which relief may be granted, the court accepts as true the allegations in the counterclaim and construes the allegations in the light most favorable to the nonmoving party. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Love v. United States, 915 F.2d 1242, 1245 (9th Cir. 1989). In general, pro se pleadings are held to less stringent standards than formal pleadings drafted by lawyers. Haines v. Kerner, 404 U.S. 519, 520-21 (1972). However, the court need not assume the truth of legal conclusions cast in the form of factual allegations. United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986).

While Rule 8(a) does not require detailed factual allegations, "it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678. A pleading is insufficient if it offers mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555; see also Iqbal, 556 U.S. at 676 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice"). Moreover, it is inappropriate to assume that the nonmoving party "can prove facts which it has not alleged or that the defendants have violated the . . . laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).

In ruling on a motion to dismiss brought pursuant to Rule 12(b)(6), the court is permitted to consider material which is properly submitted as part of the counterclaim, documents that are not physically attached if their authenticity is not contested and the defendant's counterclaim necessarily relies on them, and matters of public record. Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001).

III. Legal Standards Applicable to Motions to Strike Pursuant to Rule 12(f)

A motion to strike pursuant to Rule 12(f) allows a court to strike "from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). "[T]he function of a 12(f) motion to strike is to avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial[.]" Whittlestone, Inc. v. Handi-Craft, Co., 618 F.3d 970, 973 (9th Cir. 2010) (quotingFantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993)), rev'd on other grounds by Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 (1994); see also Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983).

A motion to strike is well-taken when "it is clear that the matter to be stricken could have no possible bearing on the subject matter of litigation." LeDuc v. Kentucky Central Life Ins. Co., 814 F.Supp. 820, 830 (N.D. Cal. 1992). Impertinent allegations are those that are not responsive or relevant to issues involved in the action and which could not be admitted as evidence in the litigation. Fantasy, Inc., 984 F.2d at 1527. "Scandalous" within the meaning of Rule 12(f) includes allegations that cast a cruelly derogatory light on a party or other person. Talbot v. Robert Mathews Distributing Co., 961 F.2d 654, 665 (7th Cir. 1992).

Ultimately, whether to grant a motion to strike applying these standards lies within the sound discretion of the district court. Fantasy, Inc., 984 F.2d at 1527; see also California Dept. of Toxic Substances Control v. Alco Pacific, Inc., 217 F.Supp.2d 1028, 1032-33 (C.D. Cal. 2002).³

ANALYSIS

I. Dr. Hu's Motion for Alternative Service

Dr. Hu seeks permission for alternative service of process on counter-defendants Yingui Li, Jinxu Wang, Jumin Sun, and Donghchen Cai who are alleged to reside in China.⁴ (Alt. Serv. Mot. (ECF No. 218) at 3.) According to the second amended counterclaim, Yingui Li is "a director of board of CSPC-Dohpen and officer of CSPC Limited." (Sec. Am. Counterclaim (ECF No. 224) at 2.) Jinxu Wang is "the Chief Executive Officer of CSPC-Dophen." (Id. at 3.) Jumin Sun "is the Chief Financial Officer of CSPC Limited[.]" (Id. at 3.) And Dongchen Cai "is the Chairman of CSPC-Dophen, CSPC Holding Limited . . . and CSPC Limited." (Id.) The motion

////seeks service "on counter defendants' US Attorney" and is brought pursuant to Rule 4(f) of the Federal Rules of Civil Procedure. (Alt. Serv. Mot. (ECF No. 218) at 2.)

Rule 4(f) of the Federal Rules of Civil Procedure provide the means by which a plaintiff may serve an individual located outside of the United States. See Fed. R. Civ. P. 4(f). Under Rule 4(f)(3), the court can

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