Opinion
DOCKET NO. A-5808-13T3
08-29-2016
TRIS PHARMA, INC., Plaintiff-Appellant, v. UCB MANUFACTURING, INC., UCB S.A., UCB INC., KREMERS URBAN LLC and KREMERS URBAN PHARMACEUTICALS, INC., Defendants-Respondents.
Charles A. Weiss argued the cause for appellant (Sherman Wells Sylvester & Stamelman, LLP, and Holland & Knight, LLP, attorneys; Joshua S. Bratspies and Mr. Weiss, on the brief). Theodore H. Jobes argued the cause for respondents (Fox Rothschild, LLP & Graham Curtin, attorneys; Scott L. Vernick, Thomas R. Curtin, Kathleen N. Fennelly and Mr. Jobes, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Simonelli, Carroll and Sumners. On appeal from Superior Court of New Jersey, Chancery Division, Middlesex County, Docket No. C-245-13. Charles A. Weiss argued the cause for appellant (Sherman Wells Sylvester & Stamelman, LLP, and Holland & Knight, LLP, attorneys; Joshua S. Bratspies and Mr. Weiss, on the brief). Theodore H. Jobes argued the cause for respondents (Fox Rothschild, LLP & Graham Curtin, attorneys; Scott L. Vernick, Thomas R. Curtin, Kathleen N. Fennelly and Mr. Jobes, on the brief). PER CURIAM
In this second Chancery Division lawsuit between pharmaceutical companies, plaintiff Tris Pharma, Inc. appeals from the July 2, 2014 order granting the Rule 4:6-2(e) and (b) motion to dismiss its complaint with prejudice by defendants UCB Manufacturing, Inc., UCB, S.A., UCB, Inc., (collectively referred to as UCB), Kremers Urban, LLC, and Kremers Urban Pharmaceuticals, Inc. (collectively, Kremers). For the reasons that follow, we affirm.
I.
By way of background, it is necessary to briefly mention the prior litigation that spurned the present dispute. In October 2010, UCB Manufacturing, Inc., filed a lawsuit alleging that its former employee, Yu-Hsing Tu, breached his employment agreement by disclosing confidential information to his new employer, Tris Pharma, which was used to develop a generic cough medicine that is the bio-equivalent of UCB's formerly-patented product Tussionex®. The Chancery judge denied requests for temporary and preliminary restraints on Tris Pharma from selling its generic product. Following discovery, the court granted summary judgment in favor of Tris Pharma, relying on its credibility findings from the preliminary injunction plenary hearing and finding that all the confidential information alleged to have been disclosed was in the public domain and thus not entitled to protection under the confidentiality provision in Tu's employment agreement.
In 2013, we affirmed the Chancery Division's decision. UCB Mfg. v. Tris Pharma, Inc., No. A-5095-10 (App. Div. Aug. 27, 2013) (slip op. at 29). We concluded that absent "prior consent of the parties[,]" the Chancery judge "should not have relied on his prior credibility determinations from the preliminary injunction hearing to rule on defendants' motion for summary judgment." Id. at 13. Nevertheless, applying New York law, we concluded that the confidentiality provision of Tu's employment agreement was unenforceable because it was "not limited in terms of time, space, or scope," and was "so vague as to encompass every phase of Tu's work experience." Id. at 22. Moreover, UCB Manufacturing "abandoned its claim of trade secret misappropriation[,]" and we concluded that there was no showing that Tu used trade secrets or confidential information to aid Tris Pharma's development of its generic product. Id. at 23-25. We explained that,
Although citing an unpublished opinion is generally forbidden, we do so here to provide a full understanding of the issues presented and pursuant to the exception in Rule 1:36-3 that permits citation "to the extent required by res judicata, collateral estoppel, the single controversy doctrine or any other similar principle of law." See Badiali v. N.J. Mfrs. Ins. Grp., 429 N.J. Super. 121, 126 n.4 (App. Div. 2012), aff'd, 220 N.J. 544 (2015).
[b]ecause the confidential information specified by [UCB Manufacturing] constituted neither trade secrets nor confidential customer data and because Tu's services were not truly special, unique, or extraordinary, [UCB Manufacturing] has no legitimate business interest in protecting the information under the highly-restrictive New York law that applies to enforcement of anticompetitive agreements.
Additionally, enforcement of the confidentiality provision would not further the general public interest.
[Id. at 25.]
Approximately four months later, Tris Pharma filed suit against UCB Manufacturing and Kremers. Tris Pharma alleged that the 2010 litigation and resulting legal costs were an objectively baseless action by UCB to maintain a monopoly by unlawful and exclusionary means designed to defeat competition. Tris Pharma specifically maintained that UCB engaged in three anti-competitive actions: (1) the maintenance of the 2010 sham litigation; (2) the introduction of its own authorized generic Tussionex® through Kremers; and (3) the false advertising on UCB's website between October 1, 2010 and January 4, 2011 that there was "No AB-rated generic substitute for TUSSIONEX." Tris Pharma's legal contentions were that UCB's actions: (1) violated the New Jersey Antitrust Act, N.J.S.A. 56:9-1 to -19; (2) amounted to unfair competition and false advertising; (3) established a prima facie case of malicious use of process; and (4) violated the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20.
The parent companies, UCB, S.A. and UCB, Inc., and subsidiary entities, Kremers Urban, LLC, and Kremers Urban Pharmaceuticals, Inc., were not parties in the 2010 litigation.
Although Tris Pharma's complaint mistakenly classifies this claim as "malicious prosecution," the Chancery court appropriately treated it as a malicious use of process claim.
UCB subsequently filed a Rule 4:6-2(e) and (b) motion to dismiss the complaint with prejudice. UCB argued that: (1) Tris Pharma's antitrust claims should be dismissed on the ground that Tris Pharma failed to allege "antitrust injury" or that the Noerr-Pennington doctrine bars Tris Pharma's antitrust claim; (2) Tris Pharma's unfair competition or false advertising claim fails to state a claim upon which relief can be granted; (3) Tris Pharma's malicious abuse of process claim does not satisfy the special grievance requirement; (4) Tris Pharma may not pursue a CFA claim because it was not involved in a consumer-oriented transaction; (5) there are no allegations of wrongdoing against Kremers; and finally, (6) UCB, S.A., the Belgian grandparent of UCB Manufacturing, should be dismissed on lack of personal jurisdiction grounds.
See United Mine Workers of Am. v. Pennington, 381 U.S. 657, 85 S. Ct. 1585, 14 L. Ed. 2d 626 (1965); E.R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127; 81 S. Ct. 523; 5 L. Ed. 2d 464 (1961)
The Chancery judge, the same judge who granted summary judgment in the 2010 lawsuit, issued a July 2, 2014 letter opinion granting UCB's motion to dismiss the complaint with prejudice. In addressing the unfair competition claim, the court found there was no New Jersey precedent addressing whether false advertising or the filing of a prior lawsuit constitutes unfair competition. The court relied upon federal decisions holding that such contentions do not constitute common law unfair competition claims. Citing SK&F, Co. v. Permo Pharm. Lab., Inc., 625 F. 2d 1055, 1062 (3d Cir. 1980), the court determined that most common law claims of unfair competition were limited to: "(1) passing off one's goods or services as those of another; or (2) unprivileged imitation." Ruling that Tris Pharma's allegations of UCB's false advertising on its website and the 2010 lawsuit were not "misappropriation of one's property by another, which usually takes the form of palming off or passing off[,]" the court found no viable unfair competition claim. The court additionally held that the alleged false advertising by UCB was a fraud against the public, which Tris Pharma does not have a right to redress under a common law claim of unfair competition.
With respect to the CFA claim, the court relied upon our prior interpretation of N.J.S.A. 56:8-19 in Papergraphics Intern., Inc. v. Correa, 389 N.J. Super. 8, 14 (App. Div. 2006), that a corporate plaintiff's standing to pursue a CFA claim is limited to its involvement in a "consumer oriented situation." The court found that Tris Pharma lacked standing to pursue a CFA claim because "[t]he evidence of the transactions and conduct between the parties here were not in the consumer oriented setting."
The court dismissed Tris Pharma's malicious use of process claim because it determined that Tris Pharma did not establish it suffered a "special grievance" as required by LoBiondo v. Schwartz, 199 N.J. 62, 90 (2009) and Baglini v. Lauletta, 338 N.J. Super. 282, 300 (App. Div.), certif. denied, 169 N.J. 608 (2001). The trial court stated:
The freedom to compete or hire theories that [Tris Pharma] relies on are not the bundle of freedoms that rise to a level of constitutional magnitude to establish a special grievance. The harms that [Tris Pharma] alleges to have suffered are typical business ramifications as a result of any lawsuit similar to the 2010 [l]awsuit. Ordinary consequences of business litigation do not constitute a special grievance. Also UCB [] never obtained a temporary restraining order or a preliminary injunction against Tris [Pharma]. Thus, Tris [Pharma] was never restrained in any way by the [c]ourt.
Finally, the Chancery court rejected Tris Pharma's claim that the 2010 lawsuit was a sham litigation in violation of the New Jersey Antitrust Act. The court noted that it was premature to dismiss the antitrust claim due to failure to plead an antitrust injury. However, it found that the 2010 lawsuit was protected by the Noerr-Pennington doctrine, which affords immunity from antitrust claims for one who petitions the government for redress.
The court rejected Tris Pharma's claim that the 2010 lawsuit was sham litigation, an exception to the Noerr-Pennington doctrine. Although the lawsuit was dismissed on summary judgment, the court determined that UCB's reliance on its expert's certification to seek legal redress against Tris Pharma gave it a reasonable basis to believe that Tris had used trade secrets or confidential information from Tu to develop its generic version of Tussionex®. It was not until Tu and Tris Pharma CEO Ketan Mehta testified at the preliminary injunction hearing that it became evident Tris Pharma had developed its generic version without using UCB trade secrets or confidential information. The court reasoned:
Clearly when UCB started the 2010 [l]awsuit against Tris [Pharma], it did not know, nor was it in a position to know these facts which were solely within the control of Tris [Pharma]. UCB had a good faith basis to assert its claim that [] Tu must have disclosed trade secrets or confidential information, which he had access to while employed at UCB, to Tris [Pharma] in order for Tris [Pharma] to develop generic
Tussionex that no one else was able to make for five years after UCB's patent had expired.
. . . .
As the finder of fact and judge assigned to the 2010 case from the beginning, I find that the UCB 2010 [l]awsuit was not "objectively meritless." If I did not believe the testimony of [] Mehta and [] Tu, UCB may very well have prevailed. Based on the findings of the [c]ourt in the 2010 [l]awsuit, it would be futile to allow the case to proceed on an allegation that the 2010 [l]awsuit was "objectively meritless such that no reasonable person could expect success on the merits." The facts of this case do not satisfy the legal analytical framework for the [sham] exception to the Noerr-Pennington immunity.
Following entry of the order dismissing its complaint, Tris Pharma timely appealed.
II.
Tris Pharma argues that the Chancery Division erred in dismissing its complaint with prejudice on UCB's motion. Having considered Tris Pharma's arguments, we affirm substantially for the sound reasons expressed in the Chancery court's written decision. We amplify its decision with the following comments.
The Chancery Court's order also dismissed claims against defendant UCB, S.A. pursuant to Rule 4:6-2(b) for lack of personal jurisdiction. However, since Tris Pharma did not brief that issue, we deem it abandoned. See Pressler & Verniero, Current N.J. Court Rules, comment 4 on R. 2:6-2 (2016); see also Sklodowsky v. Lushis, 417 N.J. Super. 648, 657 (App. Div. 2011) ("An issue not briefed on appeal is deemed waived."). --------
Our review of a trial court's dismissal of a complaint pursuant to Rule 4:6-2(e) and (b) is de novo. Flinn v. Amboy Nat. Bank, 436 N.J. Super. 274, 287 (App. Div. 2014). Our inquiry "'is limited to examining the legal sufficiency of the facts alleged on the face of the complaint.'" Green v. Morgan Props., 215 N.J. 431, 451 (2013) (quoting Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989)). Accordingly, "[t]he essential test is simply 'whether a cause of action is suggested by the facts.'" Ibid. (citation omitted). Thus, we must "'search[] the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary.'" Id. at 452 (quoting Printing Mart-Morristown, supra, 116 N.J. at 746).
Our review is "'one that is at once painstaking and undertaken with a generous and hospitable approach.'" Ibid. (quoting Printing Mart-Morristown, supra, 116 N.J. at 746). Nonetheless, dismissal is required "where the pleading does not establish a colorable claim and discovery would not develop one." State v. Cherry Hill Mitsubishi, Inc., 439 N.J. Super. 462, 467 (App. Div. 2015) (citation omitted).
Tris Pharma argues that the Chancery Division erred in dismissing its antitrust claim based on Noerr-Pennington immunity because considering its well-pled allegations as true, UCB's 2010 lawsuit was objectively baseless. The Noerr-Pennington doctrine provides that a party cannot be held liable for exercising its constitutional right to petition a governmental agency. See, e.g., Fraser v. Bovino, 317 N.J. Super. 23, 37 (App. Div. 1998) ("Under the Noerr-Pennington doctrine, those who petition the government for redress are generally afforded immunity from anti-trust liability."), certif. denied, 160 N.J. 476 (1999). The doctrine also provides that participation in judicial and administrative proceedings is protected unless it is "objectively baseless," thereby falling within the "sham" exception to the doctrine. See Prof'l Real Estate Inv'rs, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60-61, 113 S. Ct. 1920, 1928, 123 L. Ed. 2d 611, 624 (1993). To constitute a "sham," "the lawsuit must be objectively baseless in the sense that no reasonable litigant . . . could conclude that the suit is reasonably calculated to elicit a favorable outcome," and must "conceal 'an attempt to interfere directly with . . . business relationships.'" Ibid. (emphasis omitted) (quoting E.R.R. Presidents Conference, supra, 365 U.S. at 144, 81 S. Ct. at 533, 5 L. Ed. 2d at 475).
We are convinced that the dismissal of UCB's anti-trust claim in the 2010 lawsuit was not based upon a finding that the allegation was objectively baseless and a sham to effect the marketing of Tris Pharma's generic drug for UCB's patented Tussionex®. It was not until after "the lengthy evidentiary hearing at the preliminary injunction" that UCB "abandoned its claim of trade secret misappropriation." UCB Mfg., supra, No. A-5095-10 at 23. That was followed by the summary judgment dismissing the lawsuit, which we concluded was properly granted on the grounds that, as a matter of law, the confidentially agreement in Tu's employment agreement with UCB was not enforceable. Id. at 28.
Our prior criticism of the court's consideration of Tu's and Mehta's testimony in deciding summary judgment does not impede the court's subsequent finding that the 2010 lawsuit was not a sham litigation. As a result of its involvement in the prior litigation, the court was able to assess on an objective basis whether UCB's 2010 lawsuit was a sham. We discern no error in the court's findings that the lawsuit was supported by legitimate contentions.
Next, Tris Pharma argues that the Chancery court erred by holding that the common law tort of unfair competition is limited to misappropriation or "palming off" of goods or services, thereby excluding allegations of sham litigation and false advertising on UCB's website. In support, Tris Pharma asserts that our state applies the Restatement (Third) of Unfair Competition, which recognizes that while most unfair competition claims involve misappropriation of trade secrets of trademarked products, other forms of unfair competition "include a residual category encompassing other business practices determined to be unfair." Restatement (Third) of Unfair Competition § 1 comment g (1995).
There is no New Jersey precedent which supports Tris Pharma's assertion that the common law tort of unfair competition encompasses sham litigation and false advertising. While we may look to the Restatement's definition of a "trade secret" as additional support for the common law definition, the Restatement is not binding upon our courts. See Commc'ns Workers of Am. v. Rousseau, 417 N.J. Super. 341, 361-62 (App. Div. 2010) (considering both the Restatement and case law to define a "trade secret"). In addition, there is an absence of New Jersey precedent as to whether sham litigation can constitute unfair competition. Accordingly, there is no support for Tris Pharma's reliance on false advertising and UCB's prior lawsuit as a basis for its unfair competition claim.
Tris Pharma also argues that, as the commercial competitor with the greatest interest in stopping the perpetuation of UCB's fraud directed at the consumer, the Chancery court erred in construing Papergraphics Intern., Inc. to determine that Tris Pharma did not have standing to maintain its CFA claim. We disagree.
In Papergraphics Intern., Inc., we held that the CFA did not apply to the bulk sale of counterfeit ink-jet printer cartridges to a corporate plaintiff, because it intended to resell the cartridges at a significant profit and thus was not involved in a "consumer transaction." Papergraphics, supra, 389 N.J. Super. at 13-14. Applying that principle here, we are certain that Tris Pharma was not involved in a consumer transaction with UCB. Tris Pharma did not purchase a product from UCB that Tris Pharma intended to use or consume. Tris Pharma's assertions against UCB arose solely from their relationship as competing pharmaceutical companies. Under these circumstances, Tris Pharma cannot invoke the CFA.
Lastly, Tris Pharma's contention that it should be allowed to pursue a malicious use of process claim against UCB due to the failed 2010 lawsuit is without merit. To pursue a malicious use of process claim in the civil context, a plaintiff must prove:
(1) a[n] . . . action was instituted by this defendant against this plaintiff; (2) the action was motivated by malice; (3) there was an absence of probable cause to prosecute; . . . (4) the action was terminated favorably to the plaintiff. . . . [and (5)] that the plaintiff has suffered a special grievance caused by the institution of the underlying civil claim.The element in question here, is whether Tris Pharma suffered a special grievance. Our Supreme Court has explained:
[Perez v. Zagami, LLC, 443 N.J. Super. 359, 365 (App. Div. 2016) (citing LoBiondo, supra, 199 N.J. at 90).]
The added special grievance requirement reflects the significantly different implications that flow from being sued in a civil matter as compared to being prosecuted on a criminal charge. See Vickey v. Nessler, 230 N.J. Super. 141, 148-49 (App. Div.), certif. denied, 117 N.J. 74 (1989). That is to say, the special grievance is designed to take the place of the injurious effects, including arrest, restraint, or the attendant humiliation of being held on bail, finger-printed, and photographed, that ordinarily flow from a wrongfully instituted criminal charge. Id. at 147.A special grievance has been defined as "interference with one's liberty or property." Penwag Property Co. v. Landau, 76 N.J. 595, 598 (1979) (citation omitted). Our court has elaborated:
[LoBiondo, supra, 199 N.J. at 90.]
Examples of such interference or deprivation sufficient to constitute the requisite special grievance are the appointment of a receiver, filing of a petition in
bankruptcy, granting of an injunction, issuance of a writ of attachment or writ of replevin, filing of a lis pendens, issuance of an order of arrest, wrongful interference with possession or enjoyment of property, etc.
[Penwag Prop. Co. v. Landau, 148 N.J. Super. 493, 501 (App. Div. 1977), aff'd 76 N.J. 595 (1979).]
Here, Tris Pharma has not satisfied the special grievance requirement. Tris Pharma contends that: (1) UCB's 2010 lawsuit interfered with its freedom to compete with UCB by using the risk of an injunction to damage its ability to secure customers; and (2) the lawsuit interfered with its ability to employ Tu for his general knowledge and experience, impeding its liberty to hire employees and Tu's liberty to freely seek employment. The potential business consequences of UCB's lawsuit are not the type of interference of liberty or property interest which satisfies the special grievance requirement of a malicious use of process claim. Moreover, we have concluded that the lawsuit was not a sham litigation, brought in an effort to disrupt Tris Pharma's competitive business advantage without good cause.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION