Opinion
SUCV201803970BLS1
06-12-2019
AMGEN USA, INC. v. KARYOPHARM THERAPEUTICS, INC.
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Kaplan, Mitchell H., J.
MEMORANDUM OF DECISION AND ORDER ON DEFENDANT KARYOPHARM THERAPEUTICS, INC.’S MOTION TO DISMISS
Mitchell H. Kaplan, Justice
The plaintiff, Amgen USA, Inc., is a biotechnology company with a principal place of business in California; among the products it produces and sells is the prescription medication: Krypolis. The defendant, Karyopharm Therapeutics, Inc., is an early stage biotechnology company with a principal place of business in Newton, Massachusetts. Karyopharm has announced that the FDA has accepted its drug, Selixnor, for accellerated approval and it hopes to begin sale of Selixnor in 2019. In this action, Amgen alleges that Karyopharm hired a group of Amgen’s leading sales managers and these former Amgen sales managers used trade secret information to target and hire away from Amgen fifteen of Amgen’s most effective sales representatives involved in the sale of Krypolis. Amgen pleads its complaint in three counts: misappropriation of trade secrets in violation of G.L.c. 93, § 42 (Count I); tortious interference with contract (Count II); and violation of G.L.c. 93A (Count III).
The case is presently before the court on Karyopharm’s motion to dismiss the complaint for failure to state a claim on which relief may be granted. See Mass.R.Civ.P. 12(b)(6). On May 22, 2019, the court heard oral arguments on the motion. For the following reasons, Karyopharm’s motion to dismiss is DENIED .
BACKGROUND
The following summary of the facts is drawn from the allegations in the Complaint, which are assumed to be true for the purposes of this motion.
Krypolis is a prescription medication used to treat patients with relapsed or refractory multiple myeloma (a type of blood cancer). Selixnor, if approved, is intended to treat the same disease.
Amgen employs a national sales force consisting of a national sales manager, regional sales managers, district managers, and individual specialty sales representatives who specialize in selling Krypolis (the Sales Force). Each member of the Sales Force is required to sign a confidentiality and non-solicitation agreement, which states that employees must keep confidential, among other things, Amgen’s business plans, budgets, financial statements, contracts, prices, suppliers, and customers, as well as information regarding the skills and compensation of Amgen’s employees.
Amgen closely tracks and ranks each member of the Sales Force and posts weekly sales data, accessible only to authorized personnel who can access this data by username and password; sales managers can access this data for all employees they supervise. Amgen also periodically creates Talent Management Plans that track and rank the skill and performance of sales representatives to assist Amgen in making critical decisions regarding compensation and other adjustments in order to retain top sales talent. The password protected Talent Management Plans are marked confidential and are only accessible to sales managers.
Additionally, Amgen generates a weekly Customer Data Report (CDR) that provides detailed information about customer purchasing information, including products purchased, the amount of product the customer has purchased, and the potential growth of the customer account. Sales representatives receive a CDR for their accounts, district sales managers receive a CDR for accounts in their district, and regional sales managers receive a CDR for accounts in their region. Amgen also maintains and updates a report on the top 500 Krypolis accounts; only sales managers can access this report.
In February of 2018, Perry Monaco, an Amgen regional sales manager, resigned from the company and began working for Karyopharm as Vice President of Sales. At the time of his resignation, Monaco had access to Amgen’s Sales Force information and customer account information. Monaco was bound by a confidentiality and non-solicitation agreement, which stated that, for one year after his last day of employment with Amgen, he would not directly or indirectly solicit, induce, or encourage an employee of Amgen to leave the company to work for any other entity.
Karyopharm allegedly hired Monaco for the purpose of using Amgen’s trade secrets to build its blood cancer sales force in preparation for marketing Selixnor. Then, in July and September of 2018, three district sales managers at Amgen resigned from the company and joined Karyopharm. They too had access to confidential sales staff and customer information and were similarly bound by confidentiality and non-solicitation agreements. Thereafter, Monaco and the three other sales managers breached their obligations to Amgen by using confidential and trade secret information to solicit Amgen’s top Krypolis sales representatives to join Karyopharm.
On November 30, 2018, Kristina Schultz, a "top-tier" sales representative at Amgen resigned from the company to join Karyopharm. Thereafter, on December 21, 2018, fourteen of Amgen’s "top-tier" sales representatives resigned from Amgen to join Karyopharm. All fourteen sales representatives submitted similar notices of resignation and stated that they were resigning from Amgen, effective January 4, 2019.
DISCUSSION
When evaluating the legal sufficiency of a complaint pursuant to Mass.R.Civ.P. 12(b)(6), the court accepts as true all factual allegations in the complaint and all reasonable inferences that may be drawn in the plaintiff’s favor. Berish v. Bornstein, 437 Mass. 252, 267 (2002). However, to survive a motion to dismiss, a complaint must set forth the basis of the plaintiff’s entitlement to relief with "more than labels and conclusions." Iannacchino v. Ford Motor Co., 451 Mass. 623, 635-36 (2008), quoting Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (2007). While factual allegations need not be detailed, they "must be enough to raise a right to relief above the speculative level ..." Id., quoting Bell Atlantic Corp., 127 S.Ct. at 1964-65. At the pleading stage, a complaint must set forth "factual ‘allegations plausibly suggesting (not merely consistent with)’ an entitlement to relief ..." Id., quoting Bell Atlantic Corp., 127 S.Ct. at 1966.
Misappropriation of Trade Secrets (Count I)
Count I asserts a claim for misappropriation of trade secrets in violation of G.L.c. 93, § 42. Karyopharm argues that the claim must be dismissed because it is not pled with the particularity required under the recently-enacted Massachusetts Uniform Trade Secrets Act (MUTSA) and Mass.R.Civ.P. 9(b). The court disagrees.
Under the MUTSA, G.L.c. 93, § 42D(b): "In an action under sections 42 to 42G, inclusive, in alleging trade secrets misappropriation a party must state with reasonable particularity the circumstances thereof, including the nature of the trade secrets and the basis for their protection." G.L.c. 93, § 42D(b), however, does not have retroactive effect. The enabling act for the MUTSA provides that:
Sections 42 to 42G, inclusive, of chapter 93 of the General Laws shall take effect on October 1, 2018, and shall not apply to misappropriation occurring prior to the effective date. With respect to a continuing misappropriation that began prior to the effective date, said sections 42 to 42G, inclusive, also do not apply to the continuing misappropriation that occurs after the effective date .
St. 2018, c. 228, § 70 (emphasis supplied). Amgen alleges that the misappropriation of its trade secrets, at least as it relates to information regarding its sales staff, began in February of 2018 when Monaco, an Amgen regional sales manager, resigned from the company and began working for Karyopharm as Vice President of Sales. Then in July and September of 2018, three Amgen district sales managers resigned from the company and joined Karyopharm. Reading the complaint in the light most favorable to Amgen, during this period, i.e., before October 1, 2018, Karyopharm began misuse of Amgen’s trade secrets to identify and recruit additional "top-tier" Krypolis sales representatives, who then moved to Karyopharm in November and December of 2018. Accordingly, at the pleading stage of this case, the court cannot apply the new particularity pleading requirements of G.L.c. 93, § 42D(b). See St. 2018, c. 228, § 70 (providing that "[w]ith respect to a continuing misappropriation that began prior to the effective date [October 1, 2018], said sections 42 to 42G, inclusive, also do not apply to the continuing misappropriation that occurs after the effective date").
The allegations in the complaint regarding theft and misuse of Amgen’s Kryptolis customer information may well be insufficient. The complaint only alleges that the sales managers had access to this customer information, but not that they have misused it. In fact, Selixnor is not yet even approved for sale. The complaint does not allege that the sales managers had covenants not to compete in their employee contracts, and these allegations, in substance, simply suggest that the sales managers cannot accept employment with a competitor because they will inevitably disclose trade secrets.
The prior version of the Massachusetts Trade Secrets Act states: "Whoever embezzles, steals or unlawfully takes, carries away, conceals, or copies, or by fraud or by deception obtains, from any person or corporation, with intent to convert to his own use, any trade secret, regardless of value, shall be liable in tort to such person or corporation for all damages resulting therefrom. Whether or not the case is tried by a jury, the court, in its discretion, may increase the damages up to double the amount found. The term ‘trade secret’ as used in this section shall have the same meaning as is set forth in section thirty of chapter two hundred and sixty-six." G.L.c. 93, § 42. The term "trade secret" is defined in G.L.c. 266, § 30 as: "anything tangible or intangible or electronically kept or stored, which constitutes, represents, evidences or records a secret scientific, technical, merchandising, production or management information, design, process, procedure, formula, invention or improvement." G.L.c. 266, § 30. Confidential information regarding which sales representatives are the most successful in selling Krypolis may well qualify as a trade secret under MUTSA, but it is certainly "management information" under the predecessor statute.
Karyopharm also claims that Count I should be dismissed under Mass.R.Civ.P. 9(b) because the "Complaint’s foundation is an alleged fraudulent and deceptive course of conduct." Karyopharm Memorandum at 6. Under Mass.R.Civ.P. 9(b), "In all averments of fraud, mistake, duress or undue influence, the circumstances constituting shall be stated with particularity." However, Amgen does not allege fraud, mistake, duress or undue influence in this case. "Under the common law, fraud is a knowing false representation of a material fact intended to induce a plaintiff to act in reliance, where the plaintiff did, in fact, rely on the misrepresentation to his detriment." Fordyce v. Hanover, 457 Mass. 248, 257 (2010). See Masingill v. EMC Corp., 449 Mass. 532, 540 (2007). There are no allegations even suggesting false statements made to Amgen upon which it detrimentally relied.
Intentional Interference and Violation of Chapter 93A (Counts II and III)
Karyopharm also moves to dismiss Amgen’s tortious interference with contract claim and its claim for violation of G.L.c. 93A. As to both counts, Karyopharm argues that the recently-enacted MUTSA provides the exclusive remedy for conduct falling within its terms. G.L.c. 93, § 42F(a) states that: "Except as provided in subsection (b), sections 42 to 42G, inclusive, shall supersede any conflicting laws of the commonwealth providing civil remedies for the misappropriation of a trade secret." Subsection (b) of c. 93, § 42F, in turn, states that the MUTSA does not apply to:
(1) contractual remedies, provided that, to the extent such remedies are based on an interest in the economic advantage of information claimed to be confidential, such confidentiality shall be determined according to the definition of trade secret in section 42, where the terms and circumstances of the underlying contract shall be considered in such determination;
(2) remedies based on submissions to governmental units;
(3) other civil remedies to the extent that they are not based upon misappropriation of a trade secret; or
(4) criminal remedies, whether or not based upon misappropriation of a trade secret.
G.L.c. 93, § 42F(b). Whether the claims alleged in Counts II and III fall within the subsection (b) exceptions to the exclusivity provision raises an interesting issue. But, as explained above, the allegations in this complaint suggest wrongful conduct beginning before the effective date of MUTSA. In consequence, the exclusivity provisions of MUTSA cannot be the basis for a motion to dismiss.
Karyopharm also asserts that the tortious interference with contract claim pled in Count II should be dismissed because the Complaint lacks factual allegations that plausibly suggest that Karyopharm’s interference was improper in motive or means. "In an action for intentional interference with contractual relations, the plaintiff must prove that: (1) he had a contract with a third party; (2) the defendant knowingly induced the third party to break that contract; (3) the defendant’s interference, in addition to being intentional, was improper in motive or means; and (4) the plaintiff was harmed by the defendant’s actions." G.S. Enterprises, Inc. v. Falmouth Marine, Inc., 410 Mass. 262, 272 (1991). See United Truck Leasing Corp. v. Geltman, 406 Mass. 811, 812-17 (1990). The plaintiff may prove either improper motive or improper means and is not required to prove both. Kurker v. Hill, 44 Mass.App.Ct. 184, 191 (1998). "For purposes of this cause of action, ‘improper means’ may consist of a violation of a statute or common-law precept." Id. Amgen’s Complaint alleges that Karyopharm induced the sales managers to breach their employment contracts with Amgen and thus unlawfully obtained and misused Amgen’s trade secret information in violation of G.L.c. 93, § 42. That suffices to state a claim for tortious interference with contractual relations.
Karyopharm contends that the G.L.c. 93A claim pled in Count III should be dismissed because it is based on conduct that does not involve trade or commerce. See Manning v. Zuckerman, 388 Mass. 8, 12-13 (1983) (recognizing that Legislature did not intend for Chapter 93A to "cover employment contract disputes between employers and the employees who work in the employer’s organization, nor to disputes between members of that organization arising out of the employment relationship"). However, the dispute at issue in this case involves Karyopharm’s alleged inducement of Amgen sales managers to leave Amgen as a means of misappropriating Amgen’s trade secrets. Amgen is not in an employer/employee relationship with Karyopharm, and the cases cited by Karyopharm in support of this argument do not apply to allegations that Karyopharm misappropriated trade secrets by raiding Amgen of its top sales staff. See, e.g., Specialized Technology Resources, Inc. v. JPS Elastomerics Corp., 80 Mass.App.Ct. 841, 847 (2011) (noting that although the trade secret was obtained during employment and the employee was bound by a confidentiality agreement as part of his employment contract, the misappropriation of trade secret claim was actionable independent of employee’s contractual obligations and can support a claim under Chapter 93A); Jillian’s Billiard Club of America, Inc. v. Beloff Billiards, Inc., 35 Mass.App.Ct. 372, 377 (1993) (recognizing that defendant violated Chapter 93A by using trade secrets that consisted of plaintiff’s financial information and account procedures to establish a competing billiard parlor); Massachusetts Eye & Ear Infirmary v. QLT Phototherapeutics, Inc., 412 F.3d 215, 243 (1st Cir. 2005) ("Under Massachusetts law, misappropriation of trade secrets alone can constitute a violation of Chapter 93A"); Aware, Inc. v. Centillium Communications, Inc., 604 F.Supp.2d 306, 312 (D.Mass. 2009) ("[A] claim for misappropriation of trade secrets, in violation of a non-disclosure agreement and in an attempt to do business with a third party, can support a claim under Chapter 93A") (citation omitted).
ORDER
For the foregoing reasons, Defendant Karyopharm Therapeutics, Inc.’s Motion to Dismiss is DENIED.