Federal Appellate Court Explores Narrow Exception to Rule 54(b)’s Finality Rule in Trade Secrets Misappropriation Case

In a complicated trade secret misappropriation case involving an evolving cast of characters, United States First Circuit Court of Appeals affirmed the dismissal of trade secret misappropriation claims between former drug development partners. However, the First Circuit found that the district court abused its discretion by denying the plaintiff’s motion to file an amended complaint and consequently vacated the dismissal of trade secret claims against one of the defendant’s U.S. affiliate. In doing so, the Court was forced to explore the often misunderstood “narrow exception” to Rule 54(b)’s finality rule.

The plaintiff, Amyndas, is a Greek biotechnology firm that researches and develops therapeutics targeting a part of the immune system known as the complement system. In 2015, Amyndas entered into a confidential disclosure agreement (CDA) with a Danish biotech firm, Zealand, to develop treatments targeting this complement system. The following year, the parties entered into a second CDA. products as those pursued during its collaboration with Zealand. As part of its collaboration with Amyndas, Alexion requested and received certain confidential information about Amyndas’s complementary therapeutic research, including details about Amyndas’s intellectual property, planned clinical trials, platform and collaboration network.

Unbeknownst to Amyndas, during Amyndas and Alexion’s collaboration, Alexion and Zealand had been discussing their own collaboration. In March 2019, a few months after Amyndas’s agreement with Alexion ended, Zealand and Alexion issued a joint press release announcing the development of a product targeting the same protein that was the focus of Amyndas’s research and development.

Amyndas came to suspect that Alexion and Zealand had misappropriated confidential information which Amyndas had shared pursuant to the CDAs. Deeming its rights infringed, Amyndas sued Zealand, Zealand’s U.S. affiliate, and Alexion in the District Court for the District of Massachusetts. In its complaint, Amyndas alleged that the Zealand defendants breached the CDAs, misappropriated trade secrets and other confidential information, and conspired with Alexion to use those misappropriated materials in producing competing complementary therapeutic products. The complaint also alleged claims against Alexion for trade secret misappropriation, tortious interference with contractual relations, unfair competition, breach of contract, and unjust enrichment.

The Zealand defendants moved to dismiss. The district court dismissed Amyndas’s claims against both Zealand defendants, finding the claims against Zealand barred by a forum-selection provision in the CDAs and the complaint unclear about the role of Zealand’s U.S. affiliate in the alleged wrongdoing. The court noted that the complaint largely referred to “Zealand” as a single entity and did not make clear whether and how Zealand US was involved, but because Zealand US was not formed until after the CDA came into force, the “claims stated against ‘Zealand’ as a combined entity [we]re not sufficient to put Defendants on notice as to which claims pertain to Zealand [US].”

Amyndas moved for reconsideration or, in the alternative, leave to amend the complaint. In its proposed amended complaint, Amyndas included additional facts distinguishing the involvement of the two Zealand entities and pleaded its claims against them as discrete counts. The district court denied Amyndas’s motion, refusing reconsideration and denying Amyndas’s request to file an amended complaint. The court indicated that the proposed amended complaint would be futile but undertook no analysis of any specific allegations against Zealand’s U.S. affiliate, instead tersely stating that the “proposed additional factual allegations” did not “plausibly allege a basis to conclude either that the Court should disregard the Zealand defendants’ separate legal identities, or that Amyndas has stated claims directly against Zealand US.”

Amyndas appealed and, in conjunction with its notice of appeal, moved for entry of a partial final judgment pursuant to Rule 54(b). The Zealand defendants opposed the Rule 54(b) motion but the district court overruled the objections and entered a partial final judgment.

On appeal, the First Circuit began by laying out the basis for its jurisdiction before it affirmed the partial final judgment and dismissal of Zealand. Concerning its jurisdiction, the Court noted that typically an appellate court’s jurisdiction over an appeal is limited to “final decisions.” typically requires a final disposition of all claims in an action that have been brought by or against all of the parties.

However, Rule 54(b) carves out an exception to this finality principle whereby it permits a district court to issue a partial final judgment that is immediately appealable as to particular claims or parties when those claims or parties can be sufficiently separated from other claims or parties in the case. The Court described the exception as a “narrowly circumscribed” one appropriate only where the district court determines that “there is no just reason for delay” of entry of final judgment. It found that the current suit fit into that narrow exception.

Having assured itself of its jurisdiction to consider the appeal, the Court turned to the arguments of error from Amyndas. It affirmed dismissal of Zealand on the basis that Amyndas agreed in the CDAs to litigate its claims against Zealand in Denmark, where Zealand was headquartered. However, the Court reversed the denial of Amyndas’ motion to amend the complaint, noting that such leave should be liberally granted under Rule 15(a) and that the proposed amended complaint incorporated new information not available to Amyndas when it drafted its original complaint. Finally, the Court found that the allegations in the proposed amended complaint plausibly supported a cause of action against Zealand’s U.S. affiliate.

The Court’s full opinion is available here.

Super Lawyers named Illinois trade secret litigation attorney Peter Lubin and Patrick Austermuehle a Super Lawyer and Rising Star respectively in the categories of Business Litigation, Class Action, and Consumer Rights Litigation. Lubin Austermuehle’s copyright infringement and intellectual property litigation lawyers have over three decades of experience litigating complex trade secret misappropriation and copyright and trademark infringement disputes. Our Chicago and Oakbrook Terrace commercial dispute attorneys handle emergency litigation involving injunctions and TROS in a variety of intellectual property and business dispute cases involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist businesses and their owners who are victims of fraud. You can contact us by calling (630) 333-0333 or our toll-free number (833) 306-4933 or contact us online.

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