Lapchak v. Paradigm Biopharmaceuticals (USA), Inc.

[7] 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA [10] 11 PAUL A. LAPCHAK, an individual, Case No.: 24-CV-143 JLS (DDL) 12 Plaintiff, ORDER GRANTING DEFENDANTS’ 13 v. MOTION TO DISMISS 14 PARADIGM BIOPHARMACEUTICALS (ECF No. 9) (USA), INC., a Delaware corporation; and [15] DONNA SKERRETT, an individual, [16] Defendants. [17] 18 Presently before the Court are Defendants Paradigm Biopharmaceuticals (USA), 19 Inc. (“Paradigm”) and Donna Skerrett’s (“Skerrett”) (collectively, “Defendants”) Motion 20 to Dismiss Plaintiff’s First Amended Complaint’s Second, Third, and Fourth Causes of 21 Action (“Mot.,” ECF No. 9) and Memorandum of Points and Authorities in Support 22 Thereof (“Mem.,” ECF No. 9-1). Plaintiff Paul A. Lapchak filed an Opposition to the 23 Motion (“Opp’n,” ECF No. 11), to which Defendants submitted a Reply (“Reply,” ECF 24 No. 13). The Court took this matter under submission without oral argument pursuant to 25 Civil Local Rule 7.1(d)(1) on June 27, 2024. ECF No. 12. Having carefully considered 26 the Parties’ arguments, Plaintiff’s First Amended Complaint (“FAC,” ECF No. 4), and the 27 law, the Court rules as follows. 28 / / / 1 BACKGROUND 2 I. Plaintiff’s Allegations 3 Plaintiff, a San Diego, California resident, is a renowned scientist, with a PhD in 4 Pharmacology. FAC ¶¶ 1, 8. Plaintiff was hired by Paradigm, a New York corporation1 5 that develops and sells drug formulas, to be its executive, holding the title of “Global Head 6 of Translational Development,” on or about October 7, 2022. Id. ¶¶ 2, 9, 11. Plaintiff 7 alleges Skerrett, a citizen of New York, and Paradigm, were each the “alter ego of the 8 other.” Id. ¶¶ 3, 7. 9 Plaintiff was an executive for approximately 12 months, and his last performance 10 evaluation indicated he “exceeded on all measures of performance.” Id. ¶ 10. On or about 11 October 3, 2023, Paradigm sent Plaintiff a new employment agreement that had not been 12 negotiated with him, and which “materially altered several aspects of the parties’ agreed13 upon contractual relationship.” Id. ¶ 12. On or about October 10, 2023, Plaintiff protested 14 the changes and stated he would not enter into the new agreement. Id. ¶ 13. 15 Plaintiff is also a shareholder in Paradigm and shares promised to him have not been 16 timely provided, as set forth in his Employment Agreement. Id. ¶ 14. For example, his 17 “sign on bonus” of 25,000 shares were due October 24, 2022, and were not timely provided. 18 Id. ¶ 15. His one-year anniversary 100,000 shares were due October 24, 2023, and were 19 also not timely provided. Id. ¶ 16. On October 29, 2023, Paradigm issued a “trading halt” 20 and issued a “rights offer” or “entitlement offer” to its employees, and Plaintiff timely 21 exercised his entitlement/rights offer as to the missing 125,000 shares of Paradigm stock. 22 Id. ¶ 17. Plaintiff has not received the 125,000 shares to which he is entitled, nor other 23 shares to which he is entitled under a capital raise. Id. ¶¶ 18, 19. He indicates Skerrett, “is 24 a person responsible for Paradigm’s failure to pay Lapchak wages under California law.” 25 Id. ¶ 25. [28] 1 While Plaintiff alleges Paradigm is a New York corporation, the Court notes the FAC’s caption indicates 1 On November 1, 2023, at a company-wide team meeting, Plaintiff “presented an 2 overview of drug toxicity,” then on November 17, 2023, “presented a power point deck to 3 Paradigm’s safety officer, director of clinical operations, and head of osteoarthritis[,] 4 summarizing significant multi-organ toxicity of Paradigm’s drug product.” Id. ¶ 20. He 5 proceeded to inform the regulatory department of the multi-organ toxicity of the product. 6 Id. 7 Subsequently, purportedly retaliating against Plaintiff’s actions, Defendants 8 disabled Plaintiff’s access to the workplace computers. Id. ¶ 21. After Plaintiff protested, 9 Plaintiff avers Defendants “falsely claimed” Plaintiff was still an employee. Id. ¶ 21. 10 Defendants formally terminated Plaintiff on or about January 12, 2023. Id. ¶ 22. 11 II. Procedural Background 12 Plaintiff filed a Complaint on January 22, 2024. ECF No. 1. After the Parties met 13 and conferred regarding Defendants’ concerns with the Complaint, Plaintiff amended his 14 Complaint to address such concerns and filed his FAC on March 28, 2024. Mem. at 9.2 15 Defendants, dissatisfied with Plaintiff’s FAC, indicate their counsel made multiple requests 16 for Plaintiff to voluntarily agree to amend his FAC, ultimately resulting in the instant 17 Motion. Id. at 9–10. 18 Plaintiff’s FAC alleges (1) breach of contract against both Defendants; (2) breach of 19 fiduciary duties and violation of California Corporations Code Section 309 against 20 Defendant Skerrett; (3) violation of “California Whistleblower Statute” against both 21 Defendants; (4) and violations of “California Employment Law” against both Defendants. 22 See generally FAC. 23 LEGAL STANDARD 24 Rule 12(b)(6) permits a party to raise by motion the defense that the complaint 25 “fail[s] to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). The [26] 27 2 Pin citations refer to the CM/ECF page numbers electronically stamped at the top of each page of the 28 cited filing. 1 Court evaluates whether a complaint states a cognizable legal theory and sufficient facts in 2 light of Federal Rule of Civil Procedure 8(a), which requires a “short and plain statement 3 of the claim showing that the pleader is entitled to relief.” “[A] plaintiff’s obligation to 4 provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and 5 conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 6 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (alteration in original). 7 To survive a 12(b)(6) motion, then, “a complaint must contain sufficient factual 8 matter . . . to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, [9] 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570 ). A claim is facially plausible 10 when the facts pled “allow[] the court to draw the reasonable inference that the defendant 11 is liable for the misconduct alleged.” Id. “[W]here the well-pleaded facts do not permit 12 the court to infer more than the mere possibility of misconduct, the complaint has alleged— 13 but it has not ‘show[n]’—‘that the pleader is entitled to relief.’” Id. at 679 (second 14 alteration in original) (quoting Fed. R. Civ. P. 8(a)(2)). 15 When reviewing a motion to dismiss under Rule 12(b)(6), the Court applies its 16 “judicial experience and common sense.” Id. (citation omitted). Further, “a district court 17 must accept as true all facts alleged in the complaint” and “draw all reasonable inferences 18 in favor of the plaintiff.” Wi-LAN Inc. v. LG Elecs., Inc., 382 F. Supp. 3d 1012 , 1020 19 (S.D. Cal. 2019) (citing Retail Prop. Trust v. United Bhd. of Carpenters & Joiners of Am., [20] 768 F.3d 938, 945 (9th Cir. 2014)). Where a complaint does not survive 12(b)(6) review, 21 the Court will grant leave to amend unless it determines that no modified contention 22 “consistent with the challenged pleading . . . could cure the deficiency.” DeSoto v. Yellow 23 Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. 24 Serv-Well Furniture Co., 806 F.2d 1393 , 1401 (9th Cir. 1986)). 25 ANALYSIS 26 Defendants argue Plaintiff’s Second, Third, and Fourth Cause of Action fail to state 27 a claim upon which relief can be granted, and as such, they should be dismissed with 28 prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6). Mem. at 8. The Court 1 addresses each argument in turn. 2 I. Second Cause of Action 3 Plaintiff’s Second Cause of Action is titled “Breach of Fiduciary Duties and 4 Violation of California Corporations Code Section 309, et seq – Against Defendant 5 Skerrett.” FAC at 6. Defendants argue that pursuant to the “internal affairs” doctrine, 6 codified by California Corporations Code Section 2116, Delaware law, as opposed to 7 California law, would apply to Plaintiff’s breach of fiduciary duty claim. Mem. at 13. This 8 is because, under Section 2116, claims involving the internal affairs of corporations, such 9 as breach of fiduciary duties, are subject to the laws of the state of incorporation. Id. 10 Moreover, Defendants argue California Corporations Code Section 309 governs the 11 performance of duties by a director, and as Plaintiff does not allege Skerrett is a director 12 of Paradigm, Plaintiff does not state a legally cognizable claim under Section 309, even 13 were California law to apply. Id. at 14. 14 Defendants also argue Plaintiff has failed to state a claim under Delaware law. 15 Defendants contend, under Delaware law, “corporate directors do not owe fiduciary duties 16 to individual stockholders; they owe fiduciary duties to the entity and to the stockholders 17 as a whole.” Id. at 15 (quoting Klaassen v. Allegro Dev. Corp., Case No. 8626-VCL, [18] 2013 WL 5967028 , at *36 (Del. Ch. Nov. 7, 2013) (citations omitted)). Accordingly, 19 Defendant’s assert, to the extent Plaintiff’s breach of fiduciary duty claim is premised on 20 the notion that Skerrett owed a duty to Plaintiff as a specific individual shareholder, 21 Plaintiff fails to state a claim. Id. at 16. Defendants also note Plaintiff’s FAC “seems to 22 suggest Plaintiff is asserting a shareholder-derivative suit,” while failing to follow the 23 procedural requirements of such an action. Id. at 16 n.3. 24 Plaintiff, in his Opposition, does not dispute Delaware law applies. Nor does he 25 address Defendants’ contention regarding the derivative nature of his allegations. Rather 26 Plaintiff contends Skerrett, under either California or Delaware law, and irrespective of 27 whether she was a director or not, owed a fiduciary duty as a majority shareholder to 28 Plaintiff, a minority shareholder, and as such, Plaintiff’s claim should not be dismissed. 1 Opp’n at 2. Plaintiff cites In re Dell Technologies Inc. Class V Stockholders Litigation, as 2 support for his position, specifically, that “[u]nder Delaware law a shareholder owes a 3 fiduciary duty only if it owns a majority interest in or exercises control over the business 4 affairs of the corporation.” Id. (citing In re Dell Techs. Inc. Class V Stockholders Litig., 5 No. 2018-0816-JTL, 2020 Del. Ch. LEXIS 211 , at *53 (Del. Ch. June 11, 2020)). Plaintiff 6 additionally argues it would be premature to dismiss this cause of action on the basis 7 Skerrett is allegedly not a director, as such information will “come through discovery.” 8 Opp’n at 3. 9 Defendants, in Reply, take issue with Plaintiff’s citation “to a single unpublished, 10 Delaware case,” which “remains not certified for publication and is expressly ‘subject to 11 revision or withdrawal.’” Reply at 8 (citing Dell, 2020 Del. Ch. LEXIS 211 ). Defendants 12 emphasize this case does not support a finding Plaintiff sufficiently pled the Second Cause 13 of Action for breach of fiduciary duty as Plaintiff does not, in either his FAC or Opposition, 14 “put forth the elements of a cause of action for a breach of fiduciary duties under Delaware 15 law nor does he allege any facts supporting that a breach of Delaware law occurred.” Id. 16 Finally, Defendants point out that Dell is a shareholder-derivative suit, making it either 17 inapplicable here, or to the extent Plaintiff intends to plead a shareholder-derivative suit 18 based on breach of fiduciary duties, his FAC is otherwise subject to dismissal as having 19 failed to comply with the requirements under Federal Rule of Civil Procedure 23.1 for such 20 claims. Id. 21 As an initial matter, the Court agrees with Defendants that the law of the state of 22 incorporation applies to Plaintiff’s breach of fiduciary duty claim, which goes undisputed 23 by Plaintiff. See e.g., EpicentRX, Inc. v. Bianco, No. 21˗CV˗1950-MMA-DDL, [24] 2024 WL 56995 , at *17 (S.D. Cal. Jan. 4, 2024) (finding a plaintiff’s breach of fiduciary 25 duty claim fell within California Corporations Code Section 2116 and therefore applied 26 Delaware law); see also Voss v. Sutardja, No. 14-01581-LHK, 2015 WL 349444 , at *6–9 27 (N.D. Cal. Jan. 26, 2015) (applying internal affairs doctrine to breach of fiduciary claim 28 and finding the law of the state of incorporation governs). Though the Parties seem to 1 assume Delaware is Paradigm’s state of incorporation in their briefing for this Motion, 2 neither expressly indicates such. In any event, the Court ascertains from public records 3 maintained by the Delaware Secretary of State that Paradigm was incorporated in 4 Delaware.3 Delaware Secretary of State, Paradigm Biopharmaceuticals (USA) Inc. 5 (7899242), General Information Name Search, 6 https://icis.corp.delaware.gov/ecorp/entitysearch/namesearch.aspx (last visited January 17, 7 2025). Thus, Delaware law applies to this claim. 8 Accordingly, the Court finds Plaintiff has failed to plead a legally cognizable action 9 against Skerrett for breach of fiduciary duty based on California Corporations Code 10 Section 309.4 11 Next, the Court agrees with Defendants that Plaintiff has failed to state a claim for 12 breach of fiduciary duty under Delaware law. For one, Plaintiff does not identify whether 13 his claims are derivative or direct. Based on the Court’s reading of his allegations, Plaintiff 14 appears to be asserting derivative claims in large part, and to the extent he seeks to assert 15 a direct claim, has not pled sufficient factual allegations to support such a claim. 16 “The propriety of bringing a direct versus derivative claim is governed by the law of 17 the state of incorporation.” EpicentRX, Inc., 2024 WL 56995 , at *16 (quoting Yeung v. 18 Advanced Biologics, LLC, No. 17-cv-1510-JAH-JMA, 2019 WL 3936139 at *3 (S.D. Cal. 19 Aug. 20, 2019)). Accordingly, Delaware law applies to this issue. “Under Delaware law, 20 the classification of an action as direct or derivative is ‘based solely on the following 21 questions: Who suffered the alleged harm—the corporation or the suing stockholder 22 individually—and who would receive the benefit of the recovery or other remedy?’” Lee [24] 25 3 The Court may take judicial notice of records from the Delaware Secretary of State’s website pursuant to Federal Rule of Evidence 201. See, e.g., GCIU-Emp. Ret. Fund v. Shelton-TurnbuII Printers, Inc., 26 No. 2:22-CV-02381-MCS-KS, 2022 WL 18231685 , at *1 n.1 (C.D. Cal. Oct. 3, 2022). 27 4 As the Court finds Plaintiff has not pleaded a legally cognizable action under Section 309 because 28 California law does not apply to this claim, the Court does not reach the Parties’ arguments regarding 1 v. Fisher, 70 F.4th 1129 , 1139 (9th Cir. 2023) (quoting Tooley v. Donaldson, Lufkin & 2 Jenrette, Inc., 845 A.2d 1031, 1035 (Del. 2004)). Under this test, a “derivative action” is 3 one brought “on behalf of the corporation for harm done to the corporation,” while a “direct 4 action” is one where “the stockholder has demonstrated that . . . []he has suffered an injury 5 that is not dependent on an injury to the corporation.” Id. at 1139–40 (quoting Tooley, 6 845 A.2d at 1035–36) (internal citations omitted). The “[p]laintiffs’ classification of the 7 suit is not binding,” but rather a court must “independently examine the nature of the wrong 8 alleged and any potential relief to make its own determination of the suit’s classification.” [9] Id. (quoting Tooley, 845 A.2d at 1035–36) (internal citations omitted). 10 Here, Plaintiff indicates Skerrett violated her duties of care and loyalty to Plaintiff 11 as a minority shareholder by: 12 a. Distributing a disproportionate share of corporate profits 13 (whether in the form of a dividend or excessive executive 14 compensation) to Skerrett, depriving the minority shareholder 15 (Lapchak) of his fair share of the corporate profits. 16 b. Failing to notify Lapchak and other shareholders in advance 17 of the nature of payouts to Skerrett and failing to provide 18 Lapchak an opportunity to dissent. 19 c. Distributing a disproportionate share of corporate profits 20 (whether in the form of a dividend or excessive executive 21 compensation) to Skerrett, depriving the company of needed 22 funds to become profitable for all shareholders. 23 FAC ¶ 39. 24 Plaintiff’s allegations regarding excessive executive compensation, as currently 25 pled, give rise to derivative claims because “excessive executive compensation harms the 26 corporation.” Compartment IT2, LP v. Fir Tree, No. 2:17-cv-01035-MMD-VCF, [27] 2018 WL 1567841 , at *5 (D. Nev. Mar. 30, 2018) (citing Kramer v. W. Pac. Indus., Inc., [28] 546 A.2d 348, 353 (Del. 1988) (finding that claims related to purportedly excessive 1 executive compensation were derivative)). Plaintiff also alleges harm to the corporation, 2 through its being deprived of “needed funds to become profitable[.]” FAC ¶ 39. But 3 Plaintiff has not complied with Federal Rule of Civil Procedure 23.1 which governs 4 derivative claims. See Fed. R. Civ. P. 23.1(b) (requiring, among other things, a verified 5 pleading stating with particularity any effort by the plaintiff to obtain the desired action 6 from the directors or comparable authority). 7 The Court notes Plaintiff’s allegation that Skerrett failed to notify him and provide 8 him of an opportunity to dissent could potentially demonstrate harm to Plaintiff 9 independent from harm to the corporation. However, as currently pled, Plaintiff does not 10 identify what specific relief is sought for this claim, preventing the Court from examining 11 the nature of the relief in its evaluation of this claim’s classification. Moreover, Plaintiff’s 12 FAC does not explain how such conduct breached a fiduciary duty, nor does Plaintiff bring 13 forward any case law to support his contention. 14 Accordingly, the Court GRANTS Defendants’ Motion to Dismiss on these grounds. 15 The Court, however, is not presently persuaded by Defendants that Plaintiff’s Second 16 Cause of Action is “fatally flawed.” See Reply at 8. Rather, the Court determines a 17 modified contention “consistent with the challenged pleading could . . . possibly cure the 18 deficiency.” Schreiber Distrib. Co., 806 F.2d at 1401. Accordingly, the Court 19 DISMISSES Claim II WITHOUT PREJUDICE and GRANTS Plaintiff LEAVE TO 20 AMEND. 21 II. Third Cause of Action 22 Plaintiff’s Third Cause of Action is titled “Violation of California Whistleblower 23 Statute – Against Defendants.” FAC at 7. Defendants argue Plaintiff’s Third Cause of 24 Action fails to state a cognizable legal theory under which Plaintiff can recover relief as 25 Plaintiff cites California Labor Code Section 1102.6, see FAC ¶ 43, which “merely 26 provides an evidentiary standard” in connection with claims asserted under California 27 Labor Code Section 1102.5, Mem. at 17. Plaintiff responds that his claim here arises under 28 Section 1102.5, and the FAC provides sufficient notice as Section 1102.6 references 1 Section 1102.5. Opp’n at 3–4. Section 1102.6 states: 2 In a civil action or administrative proceeding brought pursuant to 3 Section 1102.5, once it has been demonstrated by a 4 preponderance of the evidence that an activity proscribed by 5 Section 1102.5 was a contributing factor in the alleged prohibited 6 action against the employee, the employer shall have the burden 7 of proof to demonstrate by clear and convincing evidence that 8 the alleged action would have occurred for legitimate, 9 independent reasons even if the employee had not engaged in 10 activities protected by Section 1102.5. [11] Cal. Lab. Code § 1102.6 . 12 The Court agrees that, while not the pinnacle of specificity, Plaintiff’s FAC alerts 13 Defendants that his claim arises under Section 1102.5. But Section 1102.5 consists of 14 various subsections describing different causes of action and Plaintiff does not point to any 15 as the basis for his claim, nor does he argue that the FAC’s allegations provide sufficient 16 notice of a particular subsection’s cause of action. 17 Instead, Plaintiff only references Section 1102.5 subsections–in particular, 18 subsections 1102.5 (b), (c), and (h)—in his Opposition to support his argument that Skerrett 19 can be sued under this statute as a “person acting on behalf of the employer.” Opp’n at 4. 20 Plaintiff does not indicate whether these are the relevant subsections underlying the claims 21 in his FAC, and even assuming Plaintiff made such an argument, he does not demonstrate 22 how the FAC itself provides sufficient notice of these claims. Twombly, 550 U.S. at 555 23 (requiring a plaintiff to provide “fair notice of what the . . . claim is and the grounds upon 24 which it rests”). 25 In any event, the Court additionally finds Plaintiff’s allegations are insufficient to 26 state a claim, as currently pled, under the identified subsections. To begin, Section 1102.5 27 subsections (c) and (h) appear to have little to no relation to Plaintiff’s allegations, as 28 subsection (c) provides protections for employees “refusing to participate” in unlawful 1 conduct and subsection (h) provides protections for employees when an employee’s 2 “family member” has engaged in protected conduct. Cal. Lab. Code § 1102.5 (c), (h). As 3 Plaintiff does not allege facts showing he refused to participate in unlawful conduct or that 4 a family member engaged in protected conduct, he has not stated a claim under these 5 subsections. 6 Section 1102.5(b), however, appears more applicable to Plaintiff’s allegations, and 7 provides: 8 An employer, or any person acting on behalf of the employer, 9 shall not retaliate against an employee for disclosing 10 information . . . to a person with authority over the employee or 11 another employee who has the authority to investigate, discover, 12 or correct the violation or noncompliance, . . . if the employee 13 has reasonable cause to believe that the information discloses a 14 violation of state or federal statute, or a violation of or 15 noncompliance with a local, state, or federal rule or regulation 16 . . . . [17] Cal. Lab. Code § 1102.5 (b). “In order to plead a prima facie case of retaliation [under 18 subsection 1102.5(b)], a plaintiff must show that []he engaged in a protected activity, h[is] 19 employer subjected h[im] to an adverse employment action, and there is a causal link 20 between the protected action and the adverse action.” Tam v. Qualcomm, Inc., [21] 300 F. Supp. 3d 1130, 1148 (S.D. Cal. 2018) (citing Patten v. Grant Joint Union High Sch. 22 Dist., 37 Cal. Rptr. 3d 113, 117 (Ct. App. 2005)). Furthermore, “[t]he employee must have 23 an actual belief that the employer’s actions were unlawful and the employee’s belief, even 24 if mistaken, must be reasonable.” Id. (citing Carter v. Escondido Union High Sch. Dist., [25] 56 Cal. Rptr. 3d 262 , 269–70 (Ct. App. 2007)). 26 Per his FAC, Plaintiff’s “reports of drug toxicity plus complaints of failure to timely 27 issue shares, removal of vested wages, [and] failure to pay 401K monies owed to him” led 28 to his termination. FAC ¶ 44. With respect to the drug toxicity complaint, Plaintiff’s FAC 1 is deficient as he points to no illegal activity he purportedly disclosed. See Love v. Motion 2 Indus., Inc., 309 F. Supp. 2d 1128, 1135 (N.D. Cal. 2004) (“Plaintiff does not cite any 3 statute, rule, or regulation that may have been violated by the disclosed conduct.”). 4 Plaintiff does allege “Defendants suspected [Plaintiff] might report drug toxicity issues to 5 the FDA,” implying that some FDA regulation may have been violated. FAC ¶ 71. But 6 courts have found such generalized references insufficient to put a defendant on notice.5 7 See La v. San Mateo Cnty. Transit Dist., No. 14-cv-01768-WHO, 2014 WL 4632224 , at *6 8 (N.D. Cal. Sept. 16, 2014) (holding the plaintiff’s “citation to a whole statutory framework” 9 did not properly state a claim under section 1102.5); Clevland v. Ludwig Inst. Cancer Rsch. 10 Ltd., No. 21cv871 JM (JLB), 2022 WL 80265 , at *4 (S.D. Cal. Jan. 7, 2022) (dismissing a 11 claim under section 1102.5 because the plaintiff’s belief that the defendant violated “some 12 provision of 2 CFR Part 200” failed to give the defendant fair notice); Chan v. Canadian 13 Standards Ass’n, No. 19-SACV-2162-JVS (JDE), 2020 WL 2496174 , at *2 (C.D. Cal. 14 Mar. 16 , 2020) (“A plaintiff must be able to identify a specific state or federal statute, rule, 15 or regulation which he believed was being violated.” (emphasis added)). 16 Next, with respect to Plaintiff’s allegations regarding his complaints that shares and 17 wages owed to him were not timely issued, Plaintiff’s FAC is devoid of facts to support a 18 causal link between the protected activity and the adverse action. A “causal link may be 19 established by an inference derived from circumstantial evidence, ‘such as the employer's 20 knowledge that the [employee] engaged in protected activities and the proximity in time 21 between the protected action and allegedly retaliatory employment decision.’” Morgan v. 22 Regents of Univ. of Cal., 105 Cal. Rptr. 2d 652, 666 (Ct. App. 2000) (first quoting Jordan 23 v. Clark, 847 F.2d 1368, 1376 (9th Cir. 1988); and then citing Fisher v. San Pedro 24 Peninsula Hosp., 262 Cal. Rptr. 842, 856 (Ct. App. 1989)). However, “[e]ssential to a [26] 5 The Court, using its judicial experience and common sense, can surmise that organ toxicity may violate [27] some statute or regulation. Nonetheless, absent more facts beyond Plaintiff reporting “significant multi28 organ toxicity” (FAC ¶ 20), the Complaint cannot overcome the weight of authority requiring more 1 causal link is evidence that the employer was aware that the plaintiff had engaged in the 2 protected activity.” Id. (first quoting Cohen v. Fred Meyer, Inc. 686 F.2d 793, 796 (9th 3 Cir. 1982); and then citing Gunther v. Washington County 623 F.2d 1303, 1316 (9th Cir. 4 1979)); see also Bowen v. M. Caratan, Inc., 142 F.Supp.3d 1007, 1031 (E.D. Cal. 2015). 5 Plaintiff’s conclusory allegation he “complained to a person with authority over him, or to 6 another employee who had the authority to investigate, discover, or correct the violation or 7 noncompliance, about drug toxicity, and also about his unissued shares, and his unpaid 8 wages,” FAC ¶ 70, does not provide “more than labels and conclusions, and a formulaic 9 recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 . In 10 other words, Plaintiff has not alleged “factual matter . . . to ‘state a claim to relief that is 11 plausible on its face.’” Iqbal, 556 U.S. at 678 (2009) (citation omitted). 12 The Court also agrees with Defendants that Plaintiff’s Third Cause of Action against 13 Defendant Skerrett, in particular, must be dismissed for the additional reason that Plaintiff 14 has failed to allege an employment relationship with Skerrett. First, the Court is not 15 convinced by Plaintiff’s contention he does not need to allege Skerrett was his employer. 16 Rather, the Court is persuaded by the courts in this district and within the Ninth Circuit 17 which have examined the issue and declined to extend individual liability under Section 18 1102.5 in the absence of an employment relationship. See e.g., United States ex rel. Lupo 19 v. Quality Assurance Servs., Inc., 242 F.Supp.3d 1020, 1030 (S.D. Cal. 2017) (granting in 20 part motion to dismiss, concluding that if the California Supreme Court were to ever 21 consider the issue, it would hold that there can be no individual liability under section 22 1102.5); United States of America ex rel. Fallon v. Bell Transit Corp., 23 No. 16˗cv˗06994˗PJH, 2021 WL 3665898 , at *5 (N. D. Cal. Aug. 18, 2021) (noting that 24 “courts have been unwilling to apply section 1102.5 to individual employee-defendants, 25 even though the statute was amended in 2014 to allow liability against ‘any person acting 26 on behalf of an employer’”); Friedman v. Jenkins, No. 23-cv-05036-JSW, [27] 2024 WL 1182878 , at *5 (N.D. Cal. Mar. 19, 2024) (noting that “[n]o court has adopted” 28 the position that Section 1102.5 provides individual liability for retaliation “in the decade 1 since Section 1102.5 was amended”). 2 And the Court is persuaded that Plaintiff has failed to allege such an employment 3 relationship here. Plaintiff’s FAC fails to allege facts, as opposed to conclusions, that 4 demonstrate Skerrett was his employer. For instance, Plaintiff’s allegation Defendants 5 were the “alter ego and agent” of each other, FAC ¶ 7, is entirely conclusory. And 6 Plaintiff’s allegations that Defendants allegedly disabled Plaintiff’s access to the workplace 7 computers and subsequently claimed he was still an employee, id. ¶¶ 21–22, are 8 insufficient, particularly considering that Plaintiff does not distinguish what conduct was 9 done by which of the two Defendants. Finally, while Plaintiff generally alleges “Skerrett 10 is a person responsible to pay [Plaintiff] wages under California law,” id. ¶ 25, this alone 11 does not plausibly demonstrate Skerrett was his employer. 12 Plaintiff also argues Skerrett had notice that she is alleged to be an employer based 13 on statements in the FAC the “individual Defendant was an employer under Labor Code 14 § 558.1 and the common law” and that “[u]nder Labor Code §§ 558(a) and 1197.1(a), 15 Paradigm’s owners, directors, officers, and managing agents may be held personally liable 16 for violations of certain wage and hour laws.” Opp’n at 4 (citing FAC ¶ 50). But this 17 argument does not save Plaintiff. As Plaintiff has failed to state sufficient facts to allege 18 an employment relationship, he has not provided “more than labels and conclusions, and a 19 formulaic recitation of the elements of a cause of action will not do.”6 Twombly, [20] 550 U.S. at 555 . 21 Accordingly, the Court GRANTS Defendants’ Motion on these grounds. However, 22 the Court finds Plaintiff may be able to address these defects through amendment, and as 23 such, DISMISSES Claim III WITHOUT PREJUDICE and GRANTS Plaintiff LEAVE 24 TO AMEND. [25] 26 6 To the extent Plaintiff references these statutes to support his argument Defendant Skerrett can be held individually liable under Section 1102.5, Plaintiff fails to provide any explanation for this theory, and the [27] statutes themselves, which both pertain to wage and hour claims, do not suggest they would make an 28 individual defendant a legally cognizable employer in a whistleblower retaliation claim brought pursuant 1 III. Fourth Cause of Action 2 Plaintiff’s Fourth Cause of Action is labeled “Violations of California Employment 3 Law” and contains five “counts” titled: 4 Count 1: Labor Code § 204 Failure to Pay Wages; 5 Count 2: Labor Code § 203 – Failure to Pay All Wages Due At Termination; 6 Count 3: Labor Code § 226 – Failure to Provide Accurate Wage Statements; 7 Count 4: Retaliation in Violation of Public Policy (Tamney); 8 Count 5: Retaliation – Labor Code Section 98.6. 9 FAC at 8–12. Defendants argue Plaintiff’s Fourth Cause of Action is “impermissibly pled 10 in its entirety as shotgun pleading.” Mem. at 18. 11 “Shotgun pleading occurs when: (1) one party pleads that multiple parties did an act, 12 without identifying which party did what specifically; or (2) when one party pleads 13 multiple claims and does not identify which specific facts are allocated to which claim.” 14 Quintanar v. County of Stanislaus, No. 118CV01403TLNBAM, 2021 WL 4443251 , at *3 15 (E.D. Cal. Sept. 28, 2021) (citing Hughey v. Camacho, No. 2:13-CV-2665-TLN-AC, [16] 2014 WL 5473184 , at *4 (E.D. Cal. Oct. 23, 2014); In re Mortgs. Ltd., 17 No. 2:08˗bk˗07465˗RJH, 2013 WL 1336830 , at *12 (Bankr. D. Ariz. Mar. 29, 2013); 18 Magulta v. Samples, 256 F.3d 1282 , 1284 (11th Cir. 2001)). 19 While Defendants argue both types of shotgun pleading exist here, Plaintiff appears 20 to only respond to the latter type. 21 Defendants first contend, although “each of the five counts therein are purportedly 22 against both Paradigm and Dr. Skerrett, Plaintiff fails to provide sufficient facts supporting 23 that Dr. Skerrett was joint employer, or otherwise mention Dr. Skerrett at all in the 33 24 paragraphs of the Fourth Cause of Action.” Mem. at 18 (citing FAC ¶¶ 49–82). Defendants 25 argue the Ninth Circuit requires some level of definition of allegations and claims between 26 codefendants, and here, there is “simply zero delineation between actions taken by 27 Paradigm as opposed to Dr. Skerrett, and vice versa.” Id. at 19–20. 28 Next, Defendants argue Plaintiff lumps together his causes of action, despite several 1 of the actions being founded upon separate occurrences. Id. at 19. For example, per 2 Defendants, Plaintiff’s failure to pay wages claim pursuant to Labor Code Section 204 does 3 not arise out of the same transaction as his claim for waiting time penalties pursuant to 4 Labor Code Section 203, as “the former alleges Plaintiff did not receive wages due to him 5 for 401k payments, PTO, and shares in the Company during Plaintiff’s employment, 6 whereas the latter necessarily arises from Plaintiff’s termination, i.e., post employment, 7 and subsequent events.” Id. Additionally, Defendants argue, the counts for retaliation in 8 violation of public policy and under Labor Code Section 98.6 “do not stem from the same 9 occurrence as the aforementioned alleged violation of wage-hour law versus alleged 10 complaint following violations.” Id. 11 Plaintiff responds that he “merely separates specific types of employment claims 12 into “Counts” and that Plaintiff’s counsel has used “Count pleading” before in this Court. 13 Opp’n at 5. Plaintiff states “[i]f Defendants truly want to take issue, then they can be 14 separated into numbered claims but there is no basis for stating each Count cannot be taken 15 as a cause of action winnable or dismissible on its own.” Id. 16 The Court is persuaded by Plaintiff that Defendants have not shown Plaintiff’s 17 “count” pleading is impermissible shotgun pleading. “In order for a complaint to be 18 considered a shotgun pleading, it must incorporate all or nearly all of the previous 19 allegations and make[] no attempt to lay out which conduct constitutes the violation 20 alleged.” Physicians Care All., LLC v. All Day Beauty, LLC, No. 2:18-CV-2602-HRH, [21] 2019 WL 176782 , at *2 (D. Ariz. Jan. 11, 2019) (alteration in original) (internal quotation 22 omitted)). Here, Plaintiff’s FAC lays out the relevant statute and conduct which constitutes 23 the violation alleged for each count. This, of course, does not mean such allegations are 24 sufficient to state the claims alleged per each count. The Court simply finds it cannot say 25 that “[i]t is virtually impossible to know which allegations of fact are intended to support 26 which claim(s) for relief.” Paylor v. Hartford Fire Ins. Co., 748 F.3d 1117, 1126 (11th 27 Cir. 2014) (first alteration in original) (internal quotation marks omitted) (quoting 28 Anderson v. Dist. Bd. of Trs., 77 F.3d 364 , 366 (11th Cir. 1996)). 1 However, Plaintiff does not address Defendants’ argument the Fourth Cause of 2 Action impermissibly fails to provide any definition of allegations and claims between 3 Defendants. Courts have also found impermissible shotgun pleadings present in 4 complaints alleging “everyone did everything” because such allegations prevent 5 defendants from understanding the nature of the claims asserted against each of them. See 6 Destfino v. Reiswig, 630 F.3d 952, 958 (9th Cir. 2011); see also Tianhai Lace Co. Ltd v. 7 Zoetop Bus. Co., No. 2:22-cv-06106-JLS-MRW, 2023 WL 3549698 , at *3 (C.D. Cal. Feb. 8 24, 2023) (holding “general allegations against all Defendants as joint 9 participants . . . unduly obscure ‘which allegations are targeted against which defendants.’” 10 (quoting Gavriliuc v. TEKsystems, Inc., No. 8:20-cv-02164-JLS-DFM, 2021 WL 3568252 , 11 at *2 (C.D. Cal. Apr. 14, 2021))). And conclusory allegations that Defendants acted as 12 agents of each other in committing the acts “does not absolve Plaintiff of the basic federal 13 pleading requirements under Rule 8(a), Twombly, and Iqbal.” Gavriliuc, [14] 2021 WL 3568252 , at *2. 15 The Court agrees that Plaintiff’s Fourth Cause of Action does not demonstrate how 16 “each . . . [D]efendant is alleged to have violated [Plaintiff’s] legal rights,” Destfino, [17] 630 F.3d at 958 , particularly considering that, as discussed above with respect to his Third 18 Cause of Action, Plaintiff has not sufficiently alleged Skerrett to be Plaintiff’s employer. 19 In any event, however, as Plaintiff does not respond to this argument, the Court considers 20 this issue waived. See Daniels v. Am.’s Wholesale Lender, 21 No. ED CV 11˗1287 PA (MANx), 2011 WL 13225097 , at *4 (C.D. Cal. Oct. 24, 2011) 22 (“Plaintiffs fail to address (much less refute) these persuasive arguments in their 23 Opposition, thus conceding them.” (citing City of Arcadia v. Env’t Prot. Agency, [24] 265 F. Supp. 2d 1142, 1154 (N.D. Cal. 2003))); Arredondo v. Univ. of La Verne, [25] 618 F. Supp. 3d 937 , 948 (C.D. Cal. 2022) (“The Court thus accepts Defendant’s argument 26 as unopposed and bars Plaintiff’s requests . . . .”); Bolooki v. Honda Motor Co., 27 No. 2:22˗cv˗04252-MCS-SK, 2023 WL 2627015 , at *3 (C.D. Cal. Mar. 10, 2023) (“[T]he 28 Court construes Plaintiffs’ silence as concurring with Defendant’s position . . . .”). 1 Defendants additionally argue Plaintiff’s “Count 2” for untimely payment of wages 2 premised on Labor Code Section 203 fails to state facts sufficient to support a cause of 3 action. First, Defendants assert Labor Code Section 203 does not set forth the timeframe 4 after which final wages may be deemed untimely paid and after which concomitant 5 penalties may be sought, as the text of Section 203 indicates “the criteria used to determine 6 whether a final wage payment is untimely is found in several alternative preceding 8 7 sections and subsections 201 through 202, all of these section and subsection [sic] have 8 different timing requirements of final wages,” and Plaintiff does not set forth which section 9 or subsection Plaintiff relies on. Mem. at 20. Further, Defendants argue Plaintiff’s facts 10 are insufficient to premise a request for penalties, as Plaintiff has not alleged facts 11 establishing when Plaintiff “actually stopped working for Defendant, and how Defendants 12 failed to pay the required wages or specific facts showing a willful refusal to pay wages 13 after Plaintiff’s termination.” Id. at 22. 14 Finally, Defendants argue Plaintiff’s “Count 4” for retaliation in violation of public 15 policy is “fatally flawed” as Plaintiff has failed to plead facts sufficient to show an 16 employment relationship with Skerrett, a required element of a wrongful termination cause 17 of action. Id. at 23 (citing Milosky v. Regents of Univ. of Cal., 44 Cal. 4th 876, 900 (2009)). 18 These arguments go unopposed in Plaintiff’s Opposition, and accordingly, the Court 19 likewise considers these issues waived. See Daniels, 2011 WL 13225097 , at *4. Thus, the 20 Court GRANTS Defendant’s Motion to Dismiss as to Plaintiff’s Fourth Cause of Action 21 on these grounds. Nevertheless, because the Court is not persuaded that amendment is 22 futile here, Plaintiff’s Fourth Cause of Action is DISMISSED WITHOUT PREJUDICE 23 and Plaintiff is GRANTED LEAVE TO AMEND. 24 CONCLUSION 25 In light of the foregoing, the Court GRANTS Defendants’ Motion to Dismiss (ECF 26 No. 9). Plaintiff’s First Amended Complaint’s Second, Third, and Fourth Causes of Action 27 are DISMISSED WITHOUT PREJUDICE. Within twenty-one (21) days of this Order, 28 Plaintiff either (1) SHALL FILE an amended complaint, or (2) SHALL INDICATE to 1 Court that it will not do so. Failure to timely select either of the above options may 2 ||result in the dismissal of all claims for failure to comply with a court order pursuant to 3 || Federal Rule of Civil Procedure 41(b). See Applied Underwriters, Inc. v. Lichtenegger, 4 F.3d 884, 890-91 (9th Cir. 2019) (explaining courts may dismiss an action under Rule 5 ||41(b) when a plaintiff fails to comply with a court order requiring the filing of an amended 6 ||complaint). Any amended complaint must be complete in and of itself without reference 7 Plaintiffs FAC; claims not realleged in the amended complaint will be considered 8 || waived. See S.D. Cal. CivLR 15.1; Lacey v. Maricopa County, 693 F.3d 896, 928 (9th Cir. 9 ||2012) (noting claims dismissed with leave to amend that are not realleged in an amended 10 || pleading may be considered waived). 11 IT IS SO ORDERED 12 I Dated: February 7, 2025 he ot J, neon. ituee 13 on. Janis L. Sammartino 14 United States District Judge