Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_19-cv-01795/USCOURTS-casd-3_19-cv-01795-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 18:1836(a) Injunction against Misappropriation of Trade Secrets

---

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA

GREENVILLE DIVISION

Concordia Pharmaceuticals Inc. SARL; ) Case No.: 6:19-cv-02061-HMH-JDA

Advanz Pharma Corp., )

formerly known as )

Concordia International Corp.; ) REPORT AND RECOMMENDATION

Concordia Pharmaceuticals (US) Inc., ) OF MAGISTRATE JUDGE

)

 Plaintiffs, ) FILED UNDER SEAL

)

v. )

)

Vitae Enim Vitae Scientific Inc., )

Charles Cavallino, Boris Gites, )

 )

Defendants, )

_________________________________ )

This matter is before the Court on Defendants’ motion to dismiss for lack of personal

jurisdiction or, in the alternative, to transfer venue. [Doc. 89.] Pursuant to the provisions

of 28 U.S.C. § 636(b) and Local Civil Rule 73.02(B)(2)(e), D.S.C., this magistrate judge is

authorized to review all pre-trial matters in cases involving litigation by individuals

proceeding pro se and to submit findings and recommendations to the District Court.1

Plaintiffs filed this action on April 5, 2019, in the United States District Court for the

Southern District of California (the “California District Court”), which, in turn, transferred the

case on June 23, 2019, to this Court (the “Transfer Order”). [Docs. 1; 55.] On August 6,

2019, Defendants filed their motion to dismiss for lack of personal jurisdiction or, in the

alternative, to transfer venue. [Doc. 89.] Plaintiffs filed a response opposing the motion

1

Although no party is proceeding pro se in this case, on July 24, 2019, this Court

consolidated this case with Civil Action Numbers 6:18-cv-704-HMH-JDA and 6:18-1658-HMHJDA and referred all actions to the undersigned for pretrial consideration. [Doc. 61.]

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on August 14, 2019, and Defendants filed a reply on August 19, 2019 [Docs. 992

; 104.] 

This motion is now ripe for review. 

BACKGROUND

The Transfer Order thoroughly sets out the procedural history of this case up to the

point of its transfer to this Court:

On April 5, 2019, Plaintiffs Concordia Pharmaceuticals

Inc., S.À.R.L. (“Concordia”); Advanz Pharma Corp. (f/k/a/

Concordia International Corp.) (“Concordia International”); and

Concordia Pharmaceuticals (US) Inc. (“Concordia US”)

(collectively “Plaintiffs”) filed a complaint against Defendants

Vitae Enim Vitae Scientific, Inc. (“VEV”), Boris Gites (“Gites”)

and Charles Cavallino (“Cavallino”) (collectively “Defendants”)

for (1) misappropriation of trade secrets under the Defend

Trade Secrets Act of 2016; (2) misappropriation of trade

secrets under the California Uniform Trade Secrets Act;

(3) violation of California Unfair Competition Law, California

Business and Professions Code section 17200 et seq.;

(4) tortious interference with prospective economic advantage;

(5) tortious interference with contract; (6) conversion; and

(7) breach of contract as to Gites and Cavallino. (Dkt. No. 1,

Compl.)

Concordia is a specialty pharmaceutical company that

sells the Donnatal® brand of products that has helped

individuals suffering from abdominal pain, bloating and irregular

diarrhea or constipation due to irritable bowel syndrome

(“IBS”). (Id. ¶ 13.) Donnatal® pharmaceutical products are a

proprietary combination of medicine used as adjunctive therapy

in treating IBS as well as acute enterocolitis and is available by

prescription only. (Id. ¶14.) The active ingredients in

Donnatal® pharmaceutical products are a combination of

phenobarbital and belladonna alkaloids (“PBA”). (Id. ¶ 15.) 

Concordia distributes and markets the Donnatal® products in

two forms: . . . immediate release Donnatal® Tablets and

fast-acting Donnatal® Elixir, available in grape or mint flavor. 

(Id. ¶ 16.) Plaintiffs have developed confidential, proprietary,

and trade secret information concerning their business and

2

Doc. 99 contains redactions. The unredacted version was filed under seal. [Doc. 102.]

2

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pharmaceutical products, such as “product formulas,

manufacturing processes, financial data, and customer

information.” (Id. ¶ 18.) Plaintiffs have taken steps to protect

their confidential, proprietary and trade secret information. (Id.

¶ 22.)

IriSys LLC, f/k/a IriSys, Inc. (“IriSys”) is a pharmaceutical

manufacturer and supplies Concordia with its Donnatal® Elixir

products pursuant to a Manufacturing Supply Agreement

(“MSA”) dated May 14, 2014. (Id. ¶ 23.) In the MSA, IriSys

acknowledged that it would be a recipient of confidential

information from Plaintiffs. (Id.) IriSys agreed to hold the

confidential information in strict confidence and has taken all

reasonable precautions to prevent any unauthorized

disclosure. (Id. ¶ 24.) They also agreed that Plaintiffs own the

intellectual property rights and inventions, including trade

secrets, that relate to Donnatal® Elixir as well as any Product

specific improvements developed by either party prior to the

term of the agreement. (Id. ¶ 25.)

Plaintiffs claim that Defendants have manufactured and

marketed a “knock-off” PBA elixir based on wrongfully obtained

intellectual property from Plaintiffs. (Id. ¶ 17.) Defendant

Cavallino was Executive Director of Manufacturing at IriSys for

five years until July 25, 2017. (Id. ¶¶ 26, 44.) On information

and belief, he was responsible for setting up many of the

methods and processes for manufacturing the Donnatal®

products and for scaling production to commercial levels. (Id.

¶ 27.) Defendant Gites also worked at IriSys for five years and

held the titles of Manufacturing Supervisor, Manufacturing

Manager, and Acting Manufacturing Head. (Id. ¶ 28.) At

certain times, Cavallino was Gites’ direct supervisor. (Id.) On

information and belief, Gites was responsible for also setting

up many of the methods and processes for manufacturing the

Donnatal® products and for scaling production to commercial

levels. (Id. ¶ 29.)

While employed with IriSys, Cavallino and Gites had

access to highly confidential information regarding the

Donnatal® products, including manufacturing processes and

procedures, vendor information, and material costs. (Id. ¶ 30.) 

On information and belief, Gites and Cavallino executed

non-disclosure agreements with IriSys which prohibited them

from disclosing Plaintiff’s confidential information. (Id. ¶ 31.)

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A. Concordia Entities’ Former Employees and Officers

Mark Thompson (“Thompson”) was the founder, Chief

Executive Officer, President, and Chairman of the Board of

Directors of Concordia International. (Id. ¶ 32.) Thompson

was actively involved in Plaintiffs’ acquisition of the Donnatal®

products in 2014. (Id.) His employment with Concordia

International ended on November 30, 2018. (Id. ¶ 33.)

Christopher Blake Kelley (“Kelley”) was the Sales

Director for Concordia US and his employment ended on

December 30, 2016. (Id. ¶ 34.) Jean-Paul Laurin (“Laurin”)

was the Vice President, Commercial Strategy, Americas for

Concordia International and his employment ended on January

31, 2017. (Id. ¶ 35.) Aaron Hullett (“Hullett”) was a Vice

President and General Manager for Concordia US and his

employment ended on January 1, 2017. (Id. ¶ 36.) Thompson,

Kelley, Laurin and Hullett, former high-ranking employees of

Plaintiffs, each had access to confidential information and trade

secrets through the ordinary course of their employment with

Plaintiffs. (Id. ¶ 37.) They each signed agreements with

Plaintiffs where they promised not to compete against Plaintiffs

for one year after the end of their employment with Plaintiffs or

use Plaintiffs’ confidential information. (Id.)

B. Alleged Conspiracy between Defendants and

Plaintiffs’ Former Employees and Officers

Cavallino and Gites secretly formed Vitae Enim Vitae

Scientific, Inc. (“VEV”) and each are Directors of VEV. (Id.

¶ 38.) No later than January 4, 2017, Defendants, along with

Kelley, Thompson, Laurin and Hullett, conspired to develop

and market PBA elixir products that would directly compete

with Donnatal® Elixir products. (Id. ¶ 40.) While Gites and

Cavallino worked at IriSys and were involved in manufacturing

Donnatal® Elixir for Plaintiffs, they were secretly developing

their “Donnatal® Generic” product. (Id. ¶ 41.) While working

at IriSys and developing competing products, Gites accessed

numerous files on IriSys’ server. (Id. ¶ 42.) Many of the files

were confidential, proprietary and trade secret information

related to Donnatal® products. (Id.) For example, the files

included the master batch records for manufacturing

Donnatal® Elixir, raw material validation procedures and data,

equipment validation procedures and data, product cost

information, product stability data, and product specification. 

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(Id.) On information and belief, Cavallino, also accessed and

used confidential, proprietary and trade secret information

belonging to Plaintiffs. (Id. ¶ 43.)

No later than August 2017, VEV agreed to manufacture

a PBA elixir product for Lazarus Pharmaceuticals, Inc.

(“Lazarus”). (Id. ¶ 45.) Lazarus is a Barbados corporation

owned by Thompson and incorporated on July 13, 2017. (Id.

¶ 46.) Kelley, Laurin, Hullet, and Thompson have each

performed work for Lazarus. (Id.) 

In October 2017, immediately before Defendants

produced a stability batch of their PBA elixir product, Gites

accessed over 1,000 files on IriSys’ server in quick succession,

which is consistent with the copying of such files to external

storage devices. (Id. ¶ 47.) The files that Gites accessed

concerned the Donnatal® products and included confidential,

proprietary, and trade secret information, including information

about stability testing of Donnatal® and its raw materials. (Id.) 

On January 2, 2018, Gites took a one-month paternity leave

from his position at IriSys and during his absence, IriSys

discovered that Gites had been accessing files containing

confidential, proprietary, and trade secret information and that

he had apparently been working with Cavallino and VEV. (Id.

¶ 48.) On February 2, 2018, Gites unexpectedly resigned

despite still being on paternity leave. (Id. ¶ 49.) At the exit

interview, Gites refused to sign an acknowledgement that he

would return materials in his possession including “product

information, manufacturing information, customer lists or

information, employee information, officer’s information,

company policies and procedures, and financial information.”

(Id.)

Plaintiffs believe that Defendants have used and

continue to use Plaintiffs’ confidential, proprietary, and trade

secret information to manufacture pharmaceuticals that

compete with their products and to their competitive advantage

and to Plaintiffs’ detriment. (Id. ¶¶ 50, 51.) Kelley, Thompson,

Laurin, and Hullett have each violated their respective

employment and separation agreements executed with the

respective Plaintiffs based on their work with Defendants. (Id.

¶ 52.)

On information and belief, Defendants and Lazarus are

seeking to exploit the reputation and success of Donnatal®

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Elixir by marketing and selling an unauthorized “generic”

version of Donnatal® Elixir. (Id. ¶ 53.) Defendants are

marketing their PBA elixir as a generic substitute for the brand

drug Donnatal® Elixir. (Id.) Lazarus has listed its PBA elixir on

the drug pricing databases published by First DataBank and

MediSpan and linked that PBA elixir to Plaintiffs’ Donnatal®

Elixir with a marketing start date on or around April 20, 2018. 

(Id. ¶ 54.) The Drug Databases are subscription-based drug

information and interactions compendia used nationwide by

health care professionals, insurers, payers and pharmaceutical

manufacturers and others to evaluate medications that are

currently on the market and also whether substitutes are

available for brand name products. (Id. ¶¶ 55, 56.)

On information and belief, pharmaceutical products that

are labeled as pharmaceutically equivalent are “linked” to one

another in the Drug Databases. (Id. ¶ 57.) Defendants’ PBA

elixir products also appear or will soon appear in drug

formularies and pharmaceutical dispensing software of

pharmacies. (Id. ¶ 58.) Believing Defendants’ PBA elixir

products to be demonstrated as therapeutically equivalent

and/or FDA-approved as an A-rated generic alternative that is

substitutable for Donnatal® Elixir, pharmacists are or will

continue to automatically substitute Defendants’ PBA elixir

products for Donnatal® Elixir when they receive a prescription

for Donnatal® Elixir. (Id. ¶ 59.) On information and belief,

neither Lazarus nor Defendants have established therapeutic

equivalence between their PBA elixir products and Donnatal®

Elixir with the FDA. (Id. ¶ 60.) On information and belief,

Defendants did not perform any tests to determine whether

their PBA elixir products were bioequivalent or therapeutically

equivalent to Donnatal® Elixir. (Id. ¶ 61.)

As a result, Plaintiffs have suffered a substantial loss in

market share as a direct result of the unlawful entry of Lazarus’

PBA elixir products onto the market. (Id. ¶ 62.) Wholesalers

and pharmacies have and/or will likely reduce inventories of

Donnatal® Elixir as a result of the marketing or availability of

Lazarus’ PBA elixir products. (Id. ¶ 63.)

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C. Prior Related Litigation

1. IriSys v. Gites, Case No. 2018-00008670, San

Diego Super. Ct., Feb. 20, 2018

On February 20, 2018, IriSys filed an action against

Gites in San Diego Superior Court for his conduct of

misappropriating IriSys’ confidential, proprietary and trade

secret information related to pharmaceuticals while employed

at IriSys from August 2012 until he resigned on February 2,

2018. (Dkt. No. 20-4, Ds’ NOL, Ex. 1, IriSys LLC vs. Gites,

Case No. 2018-00008670 (San Diego Super. Ct. filed Feb. 20,

2018), Compl. ¶ 6.) IriSys develops and manufactures

pharmaceuticals and has accumulated trade secret and

proprietary information concerning the manufacturing of

pharmaceuticals. (Id. ¶ 5.) IriSys hired Gites in August 2012

as Manufacturing Supervisor; in December 2016, Gite[s’] job

title changed to Manufacturing Manager, and in July 2017,

Gites became the Acting Manufacturing Head. (Id. ¶ 6.) In his

positions, Gites oversaw and implemented manufacturing

processes, analytics, and methods developed by the company

for various pharmaceuticals and had access to IriSys’ and its

clients’ confidential, proprietary, and trade secret information

related to the manufacturing of these pharmaceuticals, as well

as information regarding IriSys’ internal operating procedures,

client and consultant lists, and pricing. (Id. ¶ 8.)

When he was hired, Gites signed a non-disclosure

agreement with IriSys where he agreed to keep IriSys’

confidential information secret. (Id. ¶ 11.) The complaint

asserts that Gites and Cavallino, another IriSys employee,

formed VEV around September 2014. (Id. ¶ 7.) In turn, Gites

and Cavallino have been in communication with Kelley, a

former employee of IriSys’ client, who had access to these

trade secrets. (Id.)

The complaint claims that VEV rented laboratory space

in San Diego and intends to begin manufacturing generic

versions of pharmaceuticals using trade secrets that Gites

unlawfully took from IriSys and its clients. (Id. ¶ 16.) 

Moreover, Kelley has shared the trade secrets of his former

employer and with Gites and Cavallino. (Id.) In October

2017, Gites allegedly began copying thousands of IriSys’ files

which included trade secrets related to methods and

procedures used to manufacture pharmaceuticals. (Id. ¶ 13.) 

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Gites will use the trade secrets in manufacturing generic

versions of pharmaceuticals to the harm of IriSys and its client. 

(Id.) The state court complaint alleges (1) misappropriation of

trade secrets under California Uniform Trade Secrets Act;

(2) breach of contract (Non-Disclosure Agreement);

(3) violation of California Labor Code sections 2860 et seq.;

(4) conversion; (5) claim and delivery; and (6) violation of

California Penal Code section 502.

On June 14, 2019, the state court granted in part and

denied in part Gites’ motion for summary adjudication. (Irisys

LLC v. Gites, Case No. 37-2018-00008670-CU-BCCTL, San

Diego Super. Ct., Minute Order, June 14, 2019). It specifically

granted summary judgment on the fourth cause of action for

conversion and fifth cause of action for specific return of

property as they are preempted by California Civil Code

section 3426.7(b) because the common law claims are based

on the same facts as the misappropriation of trade secrets

claim. (Id.) The state court also denied summary judgment on

the breach of contract claim. (Id.) Trial is currently set on

November 22, 2019. (IriSys LLC v. Gites, Case No.

37-2018-00008670-CU-BC-CTL, San Diego Super. Ct.,

Register of Actions No. 172, June 11, 2019.)

2. Concordia v. Kelley, Case No.

6:18cv704-HMH-JDA, Dist. S. Carolina, March

14, 2018

On March 14, 2018, Concordia and Concordia US filed

a complaint against Kelley in the United States District Court

for the District of South Carolina with a first amended complaint

filed on June 13, 2018. (Dkt. No. 20-6, Ds’ NOL, Ex. 3,

Concordia v. Kelley, Case No. 6:18cv704-HMH-JDA (D.S.C.),

Dkt. No. 16, FAC (“the Kelley Action”).)

The FAC alleges that Kelley was employed by a

subsidiary of Concordia in November 2014 and became the

Sales Director for Concordia US in 2016 and executed an

Employment Agreement dated May 17, 2016, and a

Non-Competition Agreement and a Non-Disclosure and

Developments Agreement dated June 1, 2016. (Id. ¶¶ 14, 15.) 

Pursuant to those Agreements, Kelley agreed to protect the

confidential information that is proprietary to Concordia, and

not disclose any confidential information or use any confidential

information except as required during the course of performing

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his duties. (Id. ¶¶ 16, 17.) As Sales Director, he promoted and

sold the Donnatal® brand of products which required him to

work with Plaintiffs’ suppliers and customers, including IriSys. 

(Id. ¶ 18.) His position allowed him the highest level of access

and clearance to all Plaintiffs’ intellectual property, such as

product formulas, manufacturing processes, financial data,

customer information, sales and prescription data and

physician lists. (Id.) When his employment ended on

December 30, 2016, he executed a Separation Agreement

where he agreed not to disclose Plaintiffs’ confidential

information. (Id. ¶¶ 19, 20.) Plaintiffs allege that Kelley

improperly disclosed and/or used Plaintiffs’ confidential,

proprietary, and trade secret information violating the

Agreements. (Id. ¶ 21.) Kelley, together with Gites and

Cavallino, have used Plaintiffs’ confidential, proprietary, and

trade secret information to manufacture an elixir similar to

Donnatal® Elixir. (Id. ¶¶ 32, 33, 38.)

The FAC alleges causes of actions for breach of

contract for breaching the employment agreement, the

non-disclosure agreement, non-competition agreement, and

separation agreement. (Id. FAC ¶¶ 41-60.) It also alleges a

breach of contract accompanied by a fraudulent act,

misappropriation of trade secrets pursuant to the Defend Trade

Secrets Act of 2016, misappropriation of trade secrets under

South Carolina state law and violation of South Carolina unfair

trade practice act and civil conspiracy. (Id. ¶¶ 61-96.)

3. Concordia v. Lazarus, Case No.

6:18cv1658-HMH-JDA, Dist. of S. Carolina,

June 16, 2018

On June 16, 2018, Concordia, Concordia International

and Concordia US filed a complaint against Lazarus and

Cameron Pharmaceuticals LLC in the United States District

Court for the District of South Carolina. (Dkt. No. 20-6, Ds’

NOL, Ex. 4, Concordia v. Lazarus, Case No.

6:18cv1658-HMH-JDA (D.S.C.), Dkt. No. 1, Compl.) An

amended complaint was filed on February 1, 2019 that

removed Cameron Pharmaceuticals LLC as a defendant and

added Thompson and Laurin as defendants. (Dkt. No. 20-6,

Ds’ NOL, Ex. 5, Concordia v. Lazarus, Case No.

6:18cv1658-HMH-JDA (D.S.C.), Dkt. No. 1, FAC (“Lazarus

Action”.) The action concerns Lazarus, Thompson and

Laurin’s manufacture of a “knock off” PBA elixir product

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created by wrongfully obtained intellectual property of Plaintiffs

in collusion with Kelley, Hullett, Gites, Cavallino and VEV. (Id.

¶¶ 72-93.) Thompson was the founder, CEO, President and

Chairman of the Board of Concordia International. (Id. ¶ 72.) 

He was actively involved in Plaintiffs’ acquisition of the

Donnatal® products in 2014. (Id.) He ended his employment

on November 30, 2018. (Id. ¶ 73.) Laurin was the Vice

President, Commercial Strategy, Americas for Concordia

International and his employment ended on January 31, 2017. 

(Id. ¶ 75.) Both had access to Plaintiffs’ confidential

information and trade secrets through the ordinary course of

employment with Plaintiffs. (Id. ¶ 77.) The defendants, along

with Gites, Cavallino, Hullett, and Kelley have used Plaintiffs’

confidential, proprietary, and trade secret information to

develop and manufacture the PBA elixir products marketed by

Lazarus to compete with Concordia’s Donnatal® Elixir products

to the competitive advantage of Defendants, and to Plaintiffs’

detriment. (Id. ¶¶ 78-92.)

The FAC also alleges the defendants’ false or

misleading representations concerning its PBA elixir.

Concordia is the only company with a drug approval letter from

the FDA for its Donnatal[®] Elixir that is legally permitted to

market PBA products. (Id. ¶ 30.) In April 2018, Lazarus

obtained National Drug Code numbers for two PBA elixir

products. (Id. ¶ 40.) Lazarus has also listed a PBA elixir on

the drug pricing databases published by First DataBank and

MediSpan and linked the PBA elixir to Plaintiffs’ Donnatal®

Elixir with a marketing start date around April 20, 2018. (Id.

¶ 43.) The Drug Databases are subscription-based drug

information and interactions compendia used nationwide by

health care professionals, insurers, payers and pharmaceutical

manufacturers to evaluate medications on the market and

whether generic substitutes are available for brand name

products. (Id. ¶¶ 44, 45, 52.) In that Lazarus’ PBA elixir

products are “linked” to Donnatal® Elixir because the products

contain the same active ingredients, in the same amounts and

in the same dosage forms, the relevant market players believe

that the linked pharmaceutical products are FDA-approved

generic equivalents that are A-rated or shown to be

therapeutically equivalent and substitutable for the brand name

product. (Id. ¶¶ 47-49, 53-54.) However, Lazarus’ PBA elixir

product misstates the amount of active ingredients in its

product. (Id. ¶ 50.) Lazarus has also not established

therapeutic equivalence between its PBA elixir and Donnatal®

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Elixir with the FDA. (Id. ¶ 55.) Therefore, Lazarus’ advertising

of its PBA elixir products as generic to Donnatal® Elixir

misleads wholesalers, distributors, pharmacies, pharmacists

and insurers. (Id. ¶¶ 56, 57.)

The FAC alleges claims for (1) false advertising in

violation of the Lanham Act, 15 U.S.C. § 1125(a);

(2) contributory false advertising in violation of the Lanham Act,

15 U.S.C. § 1125(a); (3) unfair competition in violation of the

Lanham Act, 15 U.S.C. § 1125(a); (4) common law unfair

competition; (5) common law unjust enrichment; (6) tortious

interference with prospective economic advantage; (7) tortious

interference with contract - Thompson Agreements; (8) tortious

interference with contract – Kelley Agreements;

(9) misappropriation of trade secrets pursuant to the Defendant

Trade Secrets Act of 2016; (10) misappropriation of trade

secrets under South Carolina law; (11) violation of South

Carolina unfair trade practice act; (12) civil conspiracy and

(13) conversion. (Id.)

On February 4, 2019, the district court in South Carolina

granted Plaintiffs’ request to consolidate the Kelley Action and

Lazarus Action in the District of South Carolina. (Dkt. No. 20-9,

Ds’ NOL, Ex. 6.) The Court concluded that the two complaints

contain “common questions of law and fact and the parties will

suffer no prejudice as a result of consolidation.” (Id. at 3.)

[Doc. 55-1 at 2–12 (footnotes omitted).]

On May 15, 2019, Defendants filed a motion to dismiss or, in the alternative, stay

this case pending resolution of the Kelley and Lazarus Actions under the “first-to-file” rule

or, in the alternative, to stay pending resolution of the California state court case pursuant

to the Colorado River doctrine. [Doc. 20.] The California District Court granted the motion

and transferred this case to this Court under the first-to-file rule.3

 [Doc. 55-1 at 20.] 

3

The California District Court explained the first-to-file rule:

The first-to-file rule is a “recognized doctrine of federal

comity which permits a district court to decline jurisdiction over an

action when a complaint involving the same parties and issues has

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Although the court noted that Defendants had argued that transfer to this Court would be

inappropriate because this Court does not have personal jurisdiction over them, the court

ruled that the question of whether this Court has personal jurisdiction over Defendants was

already been filed in another district.” Pacesetter Sys., Inc. v.

Medtronic, Inc., 678 F.2d 93, 94-95 (9th Cir. 1982) (citing Church of

Scientology of Cal. v. U.S. Dep’t of Army, 611 F.2d 738, 749 (9th

Cir. 1979)). It was developed to “serve[ ] the purpose of promoting

efficiency well and should not be disregarded lightly.” Alltrade, Inc.

v. Uniweld Prod., Inc., 946 F.2d 622, 625 (9th Cir. 1991) (quoting

Church of Scientology, 611 F.2d at 750). The first-to-file rule

“allows a district court to transfer, stay, or dismiss an action when a

similar complaint has already been filed in another federal court.” Id.

at 623. In determining the applicability of the first-to-file rule, courts

look to three factors: (1) the chronology of the lawsuits, (2) the

similarity of the parties, and (3) the similarity of the issues. See id.

at 625.

The most basic aspect of the first-to-file rule is that it is

discretionary; “an ample degree of discretion, appropriate for

disciplined and experienced judges, must be left to the lower courts.’”

Alltrade, 946 F.2d at 628 (quoting Kerotest Mfg. Co. v. C-O-Two

Fire Equipment Co., 342 U.S. 180, 183-84 (1952)). The “rule is not

a rigid or inflexible rule to be mechanically applied, but rather is to

be applied with a view to the dictates of sound judicial

administration.” Pacesetter Sys., Inc., 678 F.2d at 95. Exceptions to

the first-to-file rule include where the filing of the first suit evidences

bad faith, anticipatory suits, and forum shopping. Alltrade, 946 F.2d

at 628. Moreover, a court may, in its discretion, decline to apply the

first-to-file rule in the interests of equity as well as a demonstration

of prejudice. Adoma v. Univ. of Phoenix, Inc., 711 F. Supp. 2d 1142,

1149 (E.D. Cal. 2010); Ward v. Follett Corp., 158 F.R.D. 645, 648

(N.D. Cal. 1994). When applying the first-to-file rule, courts should

be driven to maximize “economy, consistency, and comity.” Cadle

Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 604 (5th Cir. 1999).

[Doc. 55-1 at 12–13.] Because the California District Court transferred the case, it did not address

whether the case should be stayed under Colorado River Water Conservation District v. United

States, 424 U.S. 800, 817–19 (1976) (providing a test for abstention when there is an ongoing state

court proceeding where the issues before the federal court can be raised). [Doc. 55-1 at 20 n.4.]

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a question to be decided by this Court following the transfer. [Id. at 17–19.] The Court also

noted that practical considerations favored transferring the case to this Court. In particular,

the California District Court noted that Plaintiffs request preliminary injunctive relief in this

case very similar to the preliminary injunctive relief sought and denied by this Court in

Lazarus. [Id. at 19.] Were the California District Court to rule on Plaintiffs’ similar request

for preliminary injunctive relief in the present case, “it would result in a waste of duplication

of the court’s resources” and could “lead to inconsistent rulings which ‘may trench upon the

authority of sister courts’ and result ‘in piecemeal resolution of issues that call for a uniform

result.’” [Id. at 19–20 (quoting Cadle v. Whataburger of Alice, Inc., 174 F.3d 599, 603 (5th

Cir. 1999)).] Noting that the trial in this Court was set for October 22, 2019,4

 the California

District Court also determined that transferring this case to this Court, rather than simply

staying the second-filed action, would serve “to secure a prompt adjudication of Plaintiffs’

claims.” [Doc. 55-1 at 20.]

DISCUSSION

In transferring this case to this Court pursuant to the first-to-file rule, the California

District Court did not purport to address whether this Court possessed personal jurisdiction

over Defendants, whether venue was proper in this Court, or whether considerations of

convenience might justify this Court’s transferring the case back to the California District

4

Presumably, the California District Court relied on the amended scheduling order in the

Lazarus Action for the trial date. [See Lazarus Action, Doc. 101 (amended scheduling order listing

jury selection deadline as on or after October 22, 2019).] However, by the date that the California

District Court transferred the case to this Court, this Court had actually extended the jury selection

deadline to on or after December 23, 2019. [Compare Lazarus Action, Doc. 130 (second amended

scheduling order, filed June 20, 2019), with Doc. 56 (California District Court order transferring

case to this Court, filed July 23, 2019).]

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Court. [Doc. 55-1 at 17–19.] Rather, it left those questions for this Court to decide, and it

is those questions that are front and center in Defendants’ motion to dismiss. See Cadle,

174 F.3d at 606 (holding that, under the first-to-file rule, “the court in which an action is first

filed is the appropriate court to determine whether subsequently filed cases involving

substantially similar issues should proceed” (internal quotation marks omitted)); Strukmyer,

LLC v. Infinite Fin. Sols., No. 3:13-cv-3798-L, 2013 WL 6388563, at *7 (N.D. Tex. Dec. 5,

2013) (holding that, under the first-to-file rule, “the court in which the first suit was filed . .

. is entitled to determine which forum should hear th[e] dispute” (internal quotation marks

omitted)).

Defendants argue that this Court should dismiss this case because this Court lacks

personal jurisdiction over them, South Carolina’s Door Closing statute prohibits maintaining

this action in this Court, and venue for this case is improper in South Carolina.5

 [Doc. 89-1

at 8–20.] Defendants alternatively contend that this Court should transfer the case to the

California District Court pursuant to either 28 U.S.C. § 1404(a) or 1406(a). [Doc. 89-1 at

20–24.] For reasons that the Court will explain, the Court concludes that even assuming

it possesses personal jurisdiction over Defendants, venue is improper in this Court on the

Plaintiffs’ lone federal claim—for trade secret misappropriation—as well as on four of their

six state law claims. Because the Court finds that the interest of justice supports

5

This Court possesses federal question jurisdiction over Plaintiffs’ federal trade secret

misappropriation claim under 28 U.S.C. § 1331 and supplemental jurisdiction under 28 U.S.C.

§1367 over the six state law claims, all of which share a common nucleus of operative fact. Because

this Court possesses subject matter jurisdiction over all seven claims on these bases, South

Carolina’s Door Closing statute has no role to play in this case. See Dooney & Burke, Inc. v. Lee,

No. 98-1544, 1998 WL 879708, at *1 (4th Cir. Dec. 17, 1998) (noting movant had “provided no

authority for the proposition that a South Carolina statute may bar a federal court action based upon

federal question jurisdiction”). 

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transferring this case back to the California District Court rather than severing the case, the

Court recommends that the entire case be transferred back to the California District Court.6

Venue

Under Rule 12(b)(3) of the Federal Rules of Civil Procedure, parties are permitted

to file motions to dismiss for improper venue. Fed. R. Civ. P. 12(b)(3); Pee Dee Health

Care, P.A. v. Sanford, 509 F.3d 204, 209 (4th Cir. 2007). To grant a motion under Rule

12(b)(3), the court must find that venue is improper. See Fed. R. Civ. P. 12(b)(3). “‘When

a defendant objects to venue under Rule 12(b)(3), the plaintiff bears the burden of

establishing that venue is proper.’” Ameristone Tile, LLC v. Ceramic Consulting Corp., 966

F. Supp. 2d 604, 616 (D.S.C. 2013) (brackets omitted) (quoting Butler v. Ford Motor Co.,

724 F. Supp. 2d 575, 586 (D.S.C. 2010)). However, the plaintiff is required “to make only

a prima facie showing of proper venue in order to survive a motion to dismiss.” Aggarao

v. MOL Ship Mgmt. Co., Ltd., 675 F.3d 355, 366 (4th Cir. 2012). “In assessing whether

there has been a prima facie venue showing, [the court] view[s] the facts in the light most

favorable to the plaintiff.” Id. Moreover, “[o]n a motion to dismiss under Rule 12(b)(3), the

court is permitted to consider evidence outside the pleadings.” Id. at 365–66. “In a case

with multiple claims, plaintiffs have the burden of establishing that venue is proper as to

each claim. Additionally, plaintiffs must establish that venue is proper as to each

6

This Court need not determine whether it possesses personal jurisdiction over Defendants

in order to transfer the case to the California District Court based on improper venue. See In re

Carefirst of Md., Inc., 305 F.3d 253, 255–56 (4th Cir. 2002) (stating that section 1406(a)

“authorize[s] transfers in cases where . . . personal jurisdiction is lacking or some other impediment

exists that would prevent the action from going forward in [this] district.”). 

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defendant.” Magic Toyota, Inc. v. Southeast Toyota Distribs., Inc., 784 F. Supp. 306, 316

(D.S.C. 1992) (internal citation omitted). 

A case filed in an improper venue must be dismissed, or, if it is in the interest of

justice, transferred to a district in which it could have been brought. 28 U.S.C. § 1406(a). 

Under the general venue statute, a civil action may be brought, and venue is proper, in:

(1) a judicial district in which any defendant resides, if all

defendants are residents of the State in which the district is

located; 

(2) a judicial district in which a substantial part of the events or

omissions giving rise to the claim occurred, or a substantial

part of property that is the subject of the action is situated; or 

(3) if there is no district in which an action may otherwise be

brought as provided in this section, any judicial district in which

any defendant is subject to the court’s personal jurisdiction with

respect to such action.

28 U.S.C. § 1391(b).

Whether Venue is Proper in this Court

Here, the parties agree that venue in this District cannot be premised on

§ 1391(b)(1) because none of the Defendants reside in South Carolina, as noted above.7

[Docs. 89-1 at 18; 102 at 7, 20, 21.] Likewise, venue in this District is not proper under

§ 1391(b)(3) because this action could have been brought in the Southern District of

California, where all of the Defendants reside. [See Docs. 89-2; 89-3.] Accordingly, at

7

“For all venue purposes . . . a natural person . . . [is] deemed to reside in the judicial district

in which that person is domiciled” and “an entity with the capacity to sue and be sued in its common

name under applicable law . . . [is] deemed to reside, if a defendant, in any judicial district in which

such defendant is subject to the court’s personal jurisdiction with respect to the civil action in

question.” 28 U.S.C. § 1391(c)(1), (2). A natural person’s domicile “is established by physical

presence in a place in connection with a certain state of mind concerning one’s intent to remain

there.” Miss. Band of Choctaw Indians v. Holyfield, 490 U.S. 30, 48 (1989). 

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issue with regard to each of Plaintiffs’ claims is whether venue in South Carolina lies under

subsection (2), and specifically, whether “a substantial part of the events or omissions

giving rise to the claim occurred” in South Carolina. 

Importantly, “[t]he test for determining venue [under § 1391(b)(2)] is not the

defendant’s ‘contacts ’ with a particular district, but rather the location of those ‘events or

omissions giving rise to the claim.’” Cottman Transmission Sys., Inc. v. Martino, 36 F.3d

291, 294 (3d Cir. 1994); see also Zike, LLC v. Catalfumo, No. 6:11-1841-TMC, 2012 WL

12867973, at *3 (D.S.C. Feb. 29, 2012) (“‘The statutory standard for venue focuses not on

whether a defendant has made a deliberate contact—a factor in the analysis of personal

jurisdiction—but on the location where events occurred.’” (quoting MTGLQ Inv ’rs, L.P. v.

Guire, 286 F. Supp. 2d 561, 565 (D. Md. 2003))). In general, “in determining whether

events or omissions are sufficiently substantial to support venue under [§ 1391(b)(2)], a

court should not focus only on those matters that are in dispute or that directly led to the

filing of the action. Rather, it should review ‘the entire sequence of events underlying the

claim.’” Mitrano v. Hawes, 377 F.3d 402, 405 (4th Cir. 2004) (internal citation omitted).

Turning to the application of these principles to this case, the Court notes initially

that, in presenting their venue arguments, the parties do not distinguish between Plaintiffs’

different claims. Nonetheless, as noted, venue must be determined on a claim-by-claim

basis, and the Court undertakes to analyze Plaintiffs’ separate claims accordingly. See

Magic Toyota, Inc., 784 F. Supp. at 316. As the Court will discuss, five of Plaintiffs’ seven

claims focus on allegations concerning Defendants’ obtaining and using Plaintiffs’ secret

information to develop and manufacture a competing PBA product. The Court will begin

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with a discussion of those five claims, for which the Court concludes venue is not proper

in this Court. 

Plaintiffs’ federal trade secret misappropriation claim (“Claim One”) and its state law

trade secret misappropriation claim (“Claim Two”) both allege that “Defendants acquired,

disclos[ed], and/or used the master batch records for manufacturing Donnatal® Elixir, raw

material validation procedures and data, equipment validation procedures and data,

product cost information, product stability data, and product specifications.” [Doc. 1 ¶¶ 74,

85.] Plaintiffs’ state law unfair competition claim (“Claim Three”) similarly focuses on

Defendants’ “development and manufacturing of products through the unlawful use of

Plaintiffs’ confidential, proprietary, and trade secret information.” [Id. ¶ 95.] Plaintiffs’ state

law conversion claim (“Claim Six”) alleges that “Defendants copied and/or wrongfully

obtained electronic files, data and documents without the authorization of Plaintiffs,

including without limitation, documents containing or reflecting Plaintiffs’ confidential

information and Defendants have been unjustly enriched by virtue of their use of same.” 

[Id. ¶ 120.] And Plaintiffs’ state law breach of contract claim (“Claim Seven”) alleges that

Gites and Cavallino entered into non-disclosure agreements with IriSys and that they

breached those agreements “by disclosing and using confidential information belonging to

or relating to Plaintiffs to develop and manufacture a competing PBA elixir product.” [Id.

¶¶ 127–30.] 

Defendants’ argument that venue is not proper in South Carolina regarding these

claims is straightforward. [Doc. 89-1 at 19.] They contend that Plaintiffs allege Defendants

misappropriated trade secrets from Defendants’ former employer, IriSys, in San Diego and

used these trade secrets to manufacture its competing product in San Diego and sell its

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competing product to Lazarus, which is not domiciled in South Carolina. [Id.] Defendants

maintain that they have never manufactured or sold their competing product in South

Carolina and because Gites and Cavallino had worked for IriSys in San Diego, any alleged

misappropriation or breach of non-disclosure agreements they had entered into with IriSys

arose entirely in San Diego. [Id.] 

In arguing that venue is proper in South Carolina, Plaintiffs do not challenge these

factual assertions. Rather, Plaintiffs contend that Kelley, working from South Carolina,

engaged in communications with Defendants in which the parties discussed and explored

the possibility of Defendants manufacturing a product to compete with Donnatal® and

Kelley being involved in the distribution of that product.8

 [Doc. 102 at 15, 21.] Plaintiffs

also point to evidence that once Lazarus became Defendants’ distributor, Kelley provided

important assistance to Lazarus from South Carolina. [Doc. 99-1 at 9–10; see also Doc.

45-21 (VEV’s manufacturing supply agreement with Lazarus).] Plaintiffs particularly focus

8

The evidence in the record regarding these communications, viewed in the light most

favorable to Plaintiffs, shows the following. Kelley visited IriSys on January 25, 2017, to discuss

the idea of producing a competing PBA product, and Cavallino later telephoned him to tell him that

Cavallino knew someone who had a manufacturer that could make the drug. [Doc. 99-1 at 5; Doc.

104-2.] When Kelley told Cavallino he would be interested, Cavallino introduced Kelley to Gites,

and Kelley learned that Gites’s manufacturer was VEV. [Doc. 99-1 at 5–6.] As the parties began

to explore Kelley or another company distributing Defendants’ product, VEV entered a NonDisclosure Agreement with Kelley’s South Carolina company, EPC, LLC (“EPC”). [Doc. 102-1.] 

VEV later sent Kelley two quotes for a “Donnatal Generic Project Plan,” both of which were

addressed to him at his business address in South Carolina. [Docs. 102-2; 102-3.] And the parties

also negotiated several other documents, including a draft manufacturing supply agreement and draft

quality agreement. [Docs. 102-4; 102-5.] In the end, however, neither Kelley nor EPC executed a

manufacturing supply agreement with VEV. Kelley also was involved in communications with

another potential distributor that ended up not yielding an agreement. [Docs. 43-12 at 5–6; 45-2 at

2; 45-16 at 3–5.] In some of these communications, Kelley and Cavallino emphasized Cavallino’s

experience manufacturing Donnatal® for IriSys and Kelley encouraged Cavallino to use that

experience to benefit Defendants’ competing business. [Docs. 43-12 at 5–6; 45-2 at 2; 45-16 at

3–5.]

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on Kelley’s sale to Lazarus of his South Carolina company so that Lazarus could use the

address to list the PBA product in the drug databases.9

 [Doc. 99-1 at 9–10.] They also

focus on Kelley’s taking on a role as a liaison for Lazarus to Defendants, supervising the

work Defendants were doing in developing and manufacturing their product. [Docs. 99-1

at 10–11; 102-6.] 

The Court concludes that the facts Plaintiffs identify do not establish the requisite

connection between South Carolina and the allegations underlying any of the five claims

at issue. Even to the extent that any of the pre-Lazarus communications between

Defendants and Kelley may have referenced issues relating to Defendants’ manufacture

of the products, the Court concludes such communications were too tangentially related

to Defendants’ actual receipt of Plaintiffs’ secret information or their actual use of it to

develop and manufacture the product to establish venue for these claims. As for Kelley’s

assistance to Lazarus with the databases, that work pertained to the distribution of the

products Defendants manufactured, not to Defendants’ obtaining of Plaintiffs’ trade secrets

or their use of the trade secrets to develop and manufacture their products. And while

Kelley’s various connections to, and communications with, Defendants in his capacity

assisting Lazarus may have made him privy to some of Defendants’ conduct forming the

basis of these five claims, that does not alter the fact that any conduct underlying these

9

Thompson explained in an affidavit that “listing a new pharmaceutical product on drug

databases is a necessary part of the process of bringing that product to market.” [Lazarus Action,

Doc. 27-2 ¶ 17.] Thompson explained that listing a product on the databases “is much more difficult

if the company or an agent seeking to list its product does not have a United States address.” [Id.

¶ 19.] Thompson noted that Kelley solved that problem for Lazarus by selling Lazarus his South

Carolina business, and that Kelley also inputted the information for the databases for Lazarus. [Id.

¶ 20.]

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claims occurred in California, not South Carolina. Accordingly, the Court concludes that

Plaintiffs have failed to demonstrate that a substantial part of the events that actually gave

rise to Claims One, Two, Three, Six, or Seven occurred in South Carolina, and thus that

venue is improper in this Court for each of these claims.10 As the Court will explain, given

the conclusion that venue is improper here for these five claims, the Court concludes that

the interest of justice supports transferring the case to the California District Court.11 

10Although courts have traditionally held that venue must be appropriate for each claim, a

court may, in its discretion, hear claims as to which venue is lacking if those claims arise out of the

same common nucleus of operative fact as other claims to which venue is proper. See, e.g., C.H.

James & Co. v. Federal Food Marketers Co., 927 F. Supp. 187, 189 (S.D.W. Va. 1996). The

touchstones of the doctrine of “pendent venue” are “judicial economy, convenience, avoidance of

piecemeal litigation, and fairness to the litigants.” Id. at 190. This doctrine has been applied to

assert venue over pendent state law claims or another federal claim after venue has been established

as to the principal federal law claim, so long as all of the claims arose from the same nucleus of

operative fact. See, e.g., Banfield v. UHS Home Attendants, Inc., 96-cv-4850-JFK, 1997 WL

342422, at *2 (S.D.N.Y. June 23, 1997) (“[A] federal court may in its discretion hear pendent claims

which arise out of the same nucleus of operative fact as a properly venued federal law claim, even

if venue of the pendent claim otherwise would not lie.”). In this case, however, Plaintiffs make no

argument contending that the pendent venue doctrine has any application. Indeed, because the Court

concludes that venue is improper in this Court over the principal federal claim, the Court need not

consider application of the pendent venue doctrine. See Bredberg v. Long, 778 F.2d 1285, 1288 (8th

Cir. 1985).

11As the Court will explain, the Court concludes that transferring this case to the California

District Court is in the interest of justice regardless of whether venue for Plaintiffs’ remaining two

claims (“Claim Four” and “Claim Five”) is proper in this Court. Claim Four, a state law claim for

tortious interference with prospective economic advantage, focuses on “Defendants’ improper listing

and linking of its PBA elixir products to Plaintiffs’ Donnatal® Elixir in Drug Databases and

pharmacy dispensing software as well as Defendants’ additional wrongful and intentional conduct

as set forth in this Complaint” and how this conduct “has interfered with Plaintiffs’ valid contractual

relationships.” [Doc. 1 ¶ 104.] Given that Kelley allegedly undertook the listing from South

Carolina using a South Carolina address, venue in this Court for this claim is arguably proper. 

Claim Five, a state law claim for tortious interference with contract, alleges that Defendants induced

Thompson, Kelley, and Laurin to breach their agreement[s] by requesting, encouraging, or otherwise

inducing them to develop and market a competing PBA elixir product and disclose or use Plaintiffs’

confidential, proprietary, or trade secret information.” [Id. ¶ 114.] Given that Kelley was based in

South Carolina, Defendants’ alleged communications to him that induced his breach may have

formed a substantial part of the conduct underlying this claim such that venue would be proper in

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 Transfer/Severance

The venue statute requires district courts to dismiss a case filed in an improper

venue or, in the interest of justice, to transfer the case to an appropriate district. 28 U.S.C.

§ 1406(a). When evaluating the propriety of a transfer, rather than a dismissal, within the

context of § 1404, the “interest of justice” has been interpreted to include such factors as

“the pendency of a related action, the court's familiarity with the applicable law, docket

conditions, access to premises that might have to be viewed, the possibility of unfair trial,

the ability to join other parties and the possibility of harassment.” Bd. of Trustees, Sheet

Metal Workers Nat. Fund v. Baylor Heating & Air Conditioning, Inc., 702 F. Supp. 1253,

1260 (E.D. Va. 1988). “Transfer, unlike dismissal, potentially restricts a plaintiff’s ability to

choose a proper venue, and so transfer should occur only when relevant factors show the

transfer will serve the interest of justice.” Flexible Techs, Inc. v. SharkNinja Operating LLC,

No. 8:17-cv-00117-DCC, 2018 WL 1175043, at *8 (D.S.C. Feb. 14, 2018), Report and

Recommendation adopted by 2018 WL 1158425 (D.S.C. Mar. 5, 2018). The decision

whether to transfer or dismiss a case is committed to the sound discretion of the district

court. United States v. Espinoza, 641 F.2d 153, 162 (4th Cir. 1981). 

The Court notes that the parties agree that venue would be proper for all seven

claims in the California District Court, which is the district in which Plaintiffs originally

brought this action and the district of residence for all three Defendants. See 28 U.S.C. §

this Court. Cf. Boehner v. Heise, 410 F. Supp. 2d 228, 240–41 (S.D.N.Y. 2006) (holding that where

Defendants wrote a letter in Wisconsin referring “to activities taking place in New York, by a

company headquartered in New York, and the action requested in the letter [wa]s to be taken in New

York,” a substantial part of the resulting cause of action for claims for interference with business

relations, among others, occurred in New York).

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1391(b). Given that Plaintiff chose to bring suit in that Court, the interest of justice favors

transferring these five claims back to that court as opposed to dismissing them. That

leaves the question of what should be done with Claims Four and Five, which are state law

claims for tortious interference with prospective economic advantage and tortious

interference with contract. Rule 21 of the Federal Rule of Civil Procedure provides that

district courts may “sever any claim against a party.” See also Wohlford v. Davis, No.

7:18CV00224, 2019 WL 1294648, at *8 (W.D. Va. Mar. 20, 2019) (“In the interest of justice,

this court may sever and transfer [claims for which venue is not proper to a] more

appropriate venue and . . . more convenient forum.”). Accordingly, assuming venue for

these two claims is proper in this Court, severing the two claims from the remainder of this

suit and keeping them in this Court would be a possibility. Even assuming venue for these

two claims is proper here, however, the Court concludes that the interest of justice strongly

favors transferring the entire case to the California District Court.

Defendants argue that many considerations favor transferring the entire case to the

California District Court. Primarily, they contend that all of the Defendants are domiciled

in San Diego, all of Defendants’ owners and directors are located in San Diego, the San

Diego Defendants manufacture all PBA Elixir exclusively in San Diego, and they do not sell

the product directly to any customers in South Carolina. [Doc. 89-1 at 10.] On the other

hand, Plaintiffs maintain that this case is inextricably intertwined with the Lazarus and

Kelley Actions and thus that keeping the claims in this Court would be more judicially

efficient. [Doc. 102 at 23.] 

Initially, the Court notes again that the parties have not presented their venue

argument on a claim-by-claim basis. Plaintiffs’ judicial efficiency argument is that it would

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be more judicially efficient to keep this entire case in this Court than it would be to transfer

the entire case to the California District Court. [Id.] But because the Court has concluded

that venue in this Court is improper for at least five of Plaintiffs’ claims, keeping all seven

claims is not an option. And the primary efficiency benefit of keeping the entire case in this

Court—being able to litigate all of the claims in the three cases in a single forum—melts

away once it is determined that at least five of the claims will need to be transferred to the

California District Court. In fact, the Court sees little to be gained by requiring Defendants,

who are not parties to the Lazarus or Kelley Actions, to defend against Plaintiffs’ claims

piecemeal in both South Carolina and California. In addition to the burden that would be

placed on Defendants by requiring them litigate in both fora, Defendants emphasize that

the instant lawsuit is only in its beginning stages: “There have been no Rule 26 disclosures

exchanged, the parties have not participated in a scheduling conference or an ENE, and

the only discovery that has occurred is very limited discovery resulting from an order in the

Concordia Plaintiffs’ favor on a motion for expedited discovery for production of a forensic

examination of certain electronic devices of Mr. Gites.” [Doc. 89-1 at 2.] In contrast, the

Lazarus and Kelley Actions “are over a year old, and substantial discovery has occurred”

[id.], and the deadline for completion of discovery in those actions is less than one month

away (September 23, 2019), with dispositive motions due two weeks later (October 7,

2019). [Lazarus Action, Doc. 130; Kelley Action, Doc. 76.] Adding claims from the more

junior case to the mix in this Court would risk significantly delaying the disposition of the

other two cases. In light of these considerations, the Court concludes that the interest of

justice strongly favors transferring this suit back to the California District Court. 

Accordingly, the Court recommends that the case be transferred back to that district.

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CONCLUSION

Wherefore, based upon the foregoing, the Court recommends that Defendants’

motion to dismiss for lack of personal jurisdiction or, in the alternative, to transfer venue

[Doc. 89] be GRANTED in part and DENIED in part. The Court recommends that

Defendants’ motion to dismiss for lack of personal jurisdiction be DENIED; that Defendant’s

motion to dismiss for improper venue be DENIED; and that the motion to transfer be

GRANTED and that this action be transferred to the United States District Court for the

Southern District of California. 

IT IS SO ORDERED.

s/Jacquelyn D. Austin

United States Magistrate Judge

September 3, 2019

Greenville, South Carolina

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