The opinion
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8 UNITED STATES DISTRICT COURT
9 SOUTHERN DISTRICT OF CALIFORNIA
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11 MEDIMPACT HEALTHCARE Case No.: 19cv1865-GPC(LL)
SYSTEMS, INC., a California
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corporation, MEDIMPACT ORDER DENYING IQVIA INC. AND
13 INTERNATINAL LLC, a California IQVIA AG’S MOTION FOR LEAVE
limited liability company, MEDIMPACT TO FILE SECOND AMENDED
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INTERNATIONAL HONG KONG LTD., ANSWER AND COUNTERCLAIMS
15 a Hong Kong company,
[REDACTED- ORIGINAL FILED
16 Plaintiff,
UNDER SEAL]
17 v.
[DKT. NO. 305.]
18 IQVIA HOLDINGS INC., a Delaware
corporation, IQVIA INC., a Connecticut
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corporation, IQVIA AG, a Swiss
20 company, OMAR GHOSHEH,
individually, and AMIT SADANA,
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individually,
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Defendant.
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Before the Court is Counterclaim-Plaintiffs IQVIA Inc. and IQVIA AG’s (“IQVIA
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Counterclaim-Plaintiffs”) motion for leave to file a second amended answer and
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counterclaims. (Dkt. No. 305.) Medimpact Healthcare Systems, Inc., Medimpact
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International LLC, and MedImpact International Hong Kong Ltd. filed an opposition.
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1 (Dkt. No. 323.) IQVIA Counterclaim-Plaintiffs filed their reply. (Dkt. No. 348.) Based
2 on the reasoning below, the Court DENIES the motion for leave to file a second amended
3 answer and counterclaims.
4 Background1
5 Prior to the filing of the complaint in this case, on January 23, 2018, Plaintiffs
6 Medimpact International LLC (“MIL”), and MedImpact International Hong Kong Ltd.
7 (“MI-HK”) filed claims in arbitration against Dimensions Healthcare LLC
8 (“Dimensions”), which was acquired by IQVIA AG in August 2016, with the Dubai
9 International Financial Centre-London Court of International Arbitration (“DIFC-LCIA”)
10 for breaches of the terms of the parties’ Joint Venture Agreement (“JVA”) and Services
11 and License Contract (“SLC”). (Dkt. No. 170-5, Bennett Decl. Ex. A.) On April 16,
12 2019, the Arbitrator made a number of legal and factual findings in an order entitled
13 Partial Final Award on Liability. (Id. at 2-78.2) On July 24, 2019, the Arbitrator issued
14 another order on damages entitled Final Award. (Dkt. No. 170-6, Bennett Decl., Ex. B.)
15 On April 7, 2020, Plaintiffs Medimpact Healthcare Systems, Inc. (“MedImpact
16 U.S.”), Medimpact International LLC (“MIL”), and MedImpact International Hong Kong
17 Ltd. (“MI-HK”) (collectively “Plaintiffs”) filed the operative first amended complaint
18 (“FAC”) against Defendants IQVIA Holdings, Inc., IQVIA Inc., IQVIA AG, Omar
19 Ghosheh and Amit Sadana (collectively “Defendants”).3 (Dkt. No. 93, FAC.) The FAC
20 alleges ten causes of action for 1) breach of fiduciary duty; 2) inducing breach of
21 contract; 3) intentional interference with prospective economic advantage; 4) negligent
22 interference with prospective economic advantage; 5) intentional interference with a
23 contractual relationship; 6) unfair competition; 7) conspiracy; 8) misappropriation of
24 trade secrets under the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1836; 9)
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1 The Court incorporates by reference the factual background presented in its prior order on Defendants’
27 motion to dismiss. (See Dkt. No. 130 at 3-10.)
2 Page numbers are based on the CM/ECF pagination.
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1 misappropriation of trade secrets under California Uniform Trade Secrets Act
2 (“CUTSA”); and 10) violations of the Racketeer Influenced and Corrupt Organizations
3 Act (“RICO”), 18 U.S.C. § 1962(c). (Id.)
4 After the Court ruled on Defendants’ motion to dismiss the FAC on August 27,
5 2020, the remaining claims are the first cause of action for breach of fiduciary duty,
6 seventh cause of action for conspiracy against Dr. Ghosheh and Mr. Sadana, and eighth
7 cause of action for misappropriation of trade secret under DTSA, ninth cause of action
8 for misappropriation of trade secrets under CUTSA and tenth cause of action for RICO
9 violations against all Defendants. (Dkt. No. 130.) Defendants filed an answer on
10 September 10, 2020. (Dkt. No. 131.) On October 15, 2020, Defendants filed an
11 amended answer. (Dkt. No. 134.) On March 2, 2021, the Court denied Defendants’
12 motion for partial summary judgment on issue and claim preclusion based on proceedings
13 before the international arbitration. (Dkt. No. 195.) Pursuant to the Court’s ruling on
14 May 14, 2021 granting in part Defendants’ motion for reconsideration, they renewed their
15 motion for partial summary judgment on claim and issue preclusion which the Court
16 denied on August 19, 2021. (Dkt. Nos. 222, 228, 294.)
17 On September 1, 2021, IQVIA AG and IQVIA Inc. filed a motion for leave to file
18 a second amended answer and counterclaims against MedImpact U.S. and Dale Brown
19 (collectively “MedImpact Counter-Defendants”). (Dkt. No. 305.) They seek to add
20 counterclaims for 1) misappropriation of trade secrets under the DTSA; 2)
21 misappropriation of trade secrets under CUTSA; 3) violations of RICO; 4) breach of
22 fiduciary duty and duty of loyalty against Dale Brown; and 5) civil conspiracy against
23 Dale Brown. (Dkt. No. 305-3, Proposed Second Am. Ans. and Counterclaims.)
24 The proposed counterclaim alleges that MedImpact U.S. and Dale Brown targeted
25 Dimensions for the express purpose of stealing Dimensions’ trade secrets concerning
26 drug-to-diagnosis indication and contraindication edits. (Id. ¶¶ 1, 3.) “Drug-to-diagnosis
27 indication edits provide a rejection alert when a patient requests to fill a prescription for a
28 medication that is not used to treat that patient’s medical diagnosis. For example, an
1 indication edit would reject the incorrect prescription of an antibiotic—used to treat
2 bacterial infections—for a viral infection, such as influenza. Relatedly, drug-to-diagnosis
3 contraindication edits provide a rejection alert when a patient requests to fill a
4 prescription for a medication that may result in an adverse drug event if the medication is
5 taken by a patient with certain medical conditions.” (Id.) These edits save lives and
6 minimize errors, fraud, waste, and/or abuse of medications and drive savings. (Id. ¶¶ 21,
7 23.) MedImpact U.S. did not have the ability to offer such drug-to-diagnosis indication
8 and contraindication edits before the Joint Venture (“JV”) (Id. ¶ 5.) According to
9 IQVIA Counter-Plaintiffs, the unlawful scheme dated back to 2011, months before the JV
10 was created in February 2012. (Id. ¶ 1.) Medimpact U.S. gained access to Dimensions’
11 trade secrets through the JV and stole the trade secrets, bypassing years of research and
12 development, to incorporate them into MedImpact’s U.S.’s pharmacy benefit
13 management (“PBM”) platform. (Id. ¶¶ 34-35.) After the JV was terminated,
14 MedImpact U.S. planned to replace Dimensions by misappropriating IQVIA Counter-
15 Plaintiffs’ trade secrets. (Id. ¶¶ 44, 46.) MedImpact U.S., in fact, offered and/or
16 provided drug-to-diagnosis indication and contraindication edits for sale in the United
17 States, Australia, South Africa, Canada and Turkey. (Id. ¶ 48.)
18 Discussion
19 A. Federal Rule of Civil Procedure 16
20 Once a district court has established a deadline for amended pleadings, and that
21 deadline has passed, a party’s ability to amend a pleading is initially governed by Federal
22 Rule of Civil Procedure (“Rule”) 16. Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294
23 (9th Cir. 2000); Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 607-08 (9th Cir.
24 1992). Rule 16 provides that a pretrial scheduling order can only be modified “upon a
25 showing of good cause.” Fed. R. Civ. P. 16(b). “Newly discovered facts can constitute
26 good cause to modify a scheduling order.” Ogier v. KC Care, LLC, Case No. 3:18-cv-
27 00361-YY 2019 WL 3210089, at *2 (D. Or. June 17, 2019) (citing Mentor Graphics
28 Corp. v. EVE-USA, Inc., 13 F. Supp. 3d 1116, 1121 (D. Or. 2014)); Woodward v. Cnty. of
1 San Diego, Case No.: 17-CV-2369 JLS (KSC)2020 WL 1820265, at *3 (S.D. Cal. Apr.
2 10, 2020) (“Under Rule 16(b), a finding of diligence is proper when the moving party
3 obtains new evidence through the discovery process and promptly moves to amend the
4 pleading.”).
5 “Good cause” also requires a showing of diligence of the party seeking an
6 amendment once the new facts are discovered. Johnson, 975 F.2d at 609. The pretrial
7 schedule may be modified “if it cannot reasonably be met despite the diligence of the
8 party seeking the extension.” Id. In general, the focus of the diligence inquiry is on the
9 time between the moving party’s discovery of new facts and its asking leave of the court
10 to file an amended pleading. See Zivkovic v. S. Cal. Edison Corp., 302 F.3d 1080, 1087-
11 88 (9th Cir. 2002).
12 “Although the existence or degree of prejudice to the party opposing the
13 modification might supply additional reasons to deny a motion, the focus of the inquiry is
14 upon the moving party's reasons for seeking modification. If that party was not diligent,
15 the inquiry should end.” Johnson, 975 F.2d at 609 (internal citation omitted). Rule 16's
16 good cause standard is more stringent that the liberal amendment standard under Rule 15.
17 AmerisourceBergen Corp. v. Dialysist W., Inc., 465 F.3d 946, 952 (9th Cir. 2006).
18 Once “good cause” is shown under Rule 16(b), then the moving party must
19 demonstrate that an amendment is proper under Rule 15(a). Johnson, 975 F.2d at 608.
20 Under Rule 15(a), courts consider five factors when assessing a motion for leave to
21 amend: undue delay, bad faith, futility of amendment, prejudice to the opposing party and
22 whether the plaintiff has previously amended the complaint. Ahlmeyer v. Nev. Sys. of
23 Higher Educ., 555 F.3d 1051, 1055 n. 3 (9th Cir. 2009).
24 B. Analysis
25 In this case, because the deadline to file amended pleadings passed on December
26 14, 2020, (Dkt. No. 139), Rule 16(b) applies. In their motion, IQVIA Counter-Plaintiffs
27 argue that they only recently discovered the factual bases underlying their proposed
28 counterclaims based on recent production of records by Plaintiffs in August 2021. (Dkt.
1 || No. 305-1 at 17 n.8.) They also maintain that judicial economy will be served if the
2 || proposed counterclaims are litigated in a single lawsuit. (/d.) Plaintiffs respond that
3 || IQVIA Counter-Plaintiffs previously knew of the claims raised in the proposed
4 || counterclaims; in fact, the same proposed counterclaims were raised in the prior
5 || arbitration proceedings. (Dkt. No. 323 at 7, 14-15.) In reply, IQVIA Counter-Plaintiffs
6 ||claim the proposed counterclaims are not the same as the ones raised in the prior
7 || arbitration, which concluded in February 2019, because they are alleging wrongdoing by
8 ||MedImpact U.S. through the present. Moreover, they did not learn until August 2021
9 MedImpact U.S. actually misappropriated trade secrets in its MedBlocX PBM
10 || product because MedImpact U.S. has refused to respond to document requests relating to
11 ||MedBlocX in this case as well as in the prior arbitration. (Dkt. No. 348 at 9, 10.)
12 Based on a review of the counterclaims raised in the arbitration and the proposed
13 counterclaims sought to be raised this case, the Court concludes that the discovery
14 || obtained in August 2021 are not “new” facts* to support IQVIA Counter-Plaintiffs’
15 counterclaim but instead additional misappropriating conduct supporting the proposed
16 || counterclaims IQVIA Counter-Plaintiffs have known about since the arbitration.
17 In arbitration, Dimensions filed a counterclaim against MIL and MI-HK for breach
18 || of the JVA and SLC for having sed
20 | (Dt. No. 355, Bennett Decl., Ex. 3, Response to Arb. 52 at 201
21 ||(UNDER SEAL).) Specifically, they claimed that the technology MIL and MI-HK
22 ||misused concern the ability to manage ee
23 «(1c1. | 54(b) (UNDER SEAL).) Moreover,
24 |}__
2 While not specifying what evidence was “new” in their motion, IQVIA Counter-Plaintiffs, in □□□□
26 || state they recently obtained evidence in August 2021
(Dkt. No. 357, Swedlow Decl.
27 14 (UNDER SEAL).) [he Swedlow declaration also attaches emails where MedImpact sought to
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2 . (Id. ¶ 59 (UNDER SEAL).) Further,
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4 (Id. ¶ 67 (UNDER SEAL).) These issues were
5 further presented with evidentiary support in “
6 .” (Dkt. No. 355, Bennett Decl., Ex. 6 at
7 257-65 (UNDER SEAL).) Further, in arbitration, Dimensions’ expert concluded that the
8
9
10 .” (Id., Ex. 7 at 277
11 (UNDER SEAL).)
12 (Id. (UNDER SEAL).)
13 After the evidentiary hearing, Dimensions attempted to withdraw its counterclaim;
14 however, the Arbitrator exercised his discretion to retain jurisdiction over the
15 counterclaim, and dismissed it. (Dkt. No. 355, Bennett Decl., Ex. 1, ¶¶ 200-03 (UNDER
16 SEAL).) The Arbitrator noted that the counterclaim “was the subject of lengthy written
17 submissions, document production, evidence of fact and expert evidence and oral
18 submissions at the Evidentiary Hearing.” (Id. ¶ 200 (UNDER SEAL).) The facts
19 underlying the breach of contract claims based on the misappropriation of trade secrets
20 and breach of fiduciary duty raised in the arbitration mirror the facts supporting the
21 counterclaims for the misappropriation of trade secrets and breach of fiduciary duty
22 raised in this case.
23 In reply, IQVIA Counter-Plaintiffs argue that the proposed counterclaims are not
24 coextensive with the arbitration counterclaim because this case concerns conduct by
25 MedImpact U.S. that continue to the present day. (Dkt. No. 348 at 9.) Their argument
26 essentially concedes that the evidence provided in discovery are not “new” but are merely
27 additional facts supporting the same core operative facts that formed the basis of the
28 counterclaims in the arbitration. Interestingly, IQVIA Counter-Plaintiffs do not challenge
1 or dispute that the facts supporting the counterclaims raised in the arbitration are similar
2 to those raised in the proposed counterclaims. (See Dkt. No. 348.) Because the proposed
3 counterclaims are premised on the very same facts set forth in the prior arbitration,
4 IQVIA Counter-Plaintiffs have failed to demonstrate good cause. See In re W. States
5 Wholesale Nat. Gas Antitrust Litig., 715 F.3d 716, 737 (9th Cir. 2013), aff'd sub nom.
6 Oneok, Inc. v. Learjet, Inc., 135 S. Ct. 1591 (2015) (quoting the district court’s decision
7 that “[t]he good cause standard typically will not be met where the party seeking to
8 modify the scheduling order has been aware of the facts and theories supporting
9 amendment since the inception of the action.”).
10 “The Federal Rules of Civil Procedure contemplate that plaintiffs may not have
11 access to evidence to support their claims until they engage in the discovery process.
12 This is why parties are permitted to allege facts upon information and belief. Thus,
13 Plaintiff's lack of access to documentary evidence to prove his new causes of action did
14 not prevent him from raising those allegations in either his initial or first amended
15 complaints.” Alsabur v. Autozone, Inc., Case No.: CV 13–01689–KAW, 2014 WL
16 1340730, at *3 (N.D. Cal. Apr. 3, 2014) (factual allegations in a pleading do not need to
17 be supported by actual evidence at the time of filing) (citing Fed. R. Civ. P. 11(b)(3)5).
18 Here, even if IQVIA Counter-Plaintiffs did not have the additional evidence of
19 MedImpact U.S.’s alleged misappropriation or Mr. Brown’s alleged breach of fiduciary
20 duty, the proposed counterclaims could have and should have been raised when IQVIA
21 Counter-Plaintiffs filed their answer. IQVIA Counter-Plaintiffs have failed to
22 demonstrate diligence in seeking to file the proposed second amended answer and
23 counterclaim under Rule 16(b).6
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5 Rule 11(b)(3) provides that an attorney “certifies that to the best of the person's knowledge,
26 information, and belief, formed after an inquiry reasonable under the circumstances: . . . (3) the factual
contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support
27 after a reasonable opportunity for further investigation or discovery; . . . .” Fed. R. Civ. P. 11(b)(3).
6 IQVIA Counter-Plaintiffs raise a number of arguments not relevant on a Rule 16(b) analysis such as
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1 IQVIA Counter-Plaintiffs further claim that they should be granted leave to amend
2 to add their counterclaim in order to bolster their existing unclean hands defense.7 (Dkt.
3 No. 305-1 at 17.) Plaintiff objects arguing that IQVIA Counter Plaintiffs should not be
4 allowed to backdoor their counterclaims into an unclean hands affirmative defense. (Dkt.
5 No. 323 at 31.)
6 The unclean hands affirmative defense is alleged in the operative Amended
7 Answer claiming, “Plaintiffs’ First Amended Complaint is barred, in whole or in part, by
8 the doctrine of unclean hands. Among other things, Plaintiffs’ allegations in this case are
9 inconsistent with their allegations in the prior arbitral proceeding.” (Dkt. No. 134 at 27).
10 The proposed Second Amended Answer seek to amend the unclean hands affirmative
11 defense to “Plaintiffs’ First Amended Complaint is barred, in whole or in part, by the
12 doctrine of unclean hands. Among other things, Plaintiffs’ allegations in this case are
13 inconsistent with their allegations in the prior arbitral proceeding. Defendants
14 additionally incorporate herein by reference all allegations set forth in IQVIA Inc.’s and
15 IQVIA’s AG’s Counterclaims against MedImpact Healthcare Systems Inc. and Dale
16 Brown.” (Dkt. No. 305-3, Swedlow Decl., Ex. A at 30.)
17 IQVIA Counter-Plaintiffs fail to provide relevant legal authority that bolstering an
18 affirmative defense satisfies the “good cause” standard under Rule 16(b).8 Accordingly,
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Ninth Circuit has held that the key question under a Rule 16 “good cause” analysis is diligence. See
22 Johnson, 975 F.2d at 609 (“If that party was not diligent, the inquiry should end.”); see also McBroom v.
Ethicon, Inc., No. CV-20-02127-PHX-DGC, 2021 WL 961777, at *1 (D. Az. Mar. 15, 2021)
23 (“Defendants cite no Ninth Circuit authority holding that judicial efficiency satisfies Rule 16(b)’s good
cause requirement. . . .”). Here, IQVIA Counter-Plaintiffs lacked diligence by not alleging the proposed
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counterclaims at the time the answer was filed.
25 7 While IQVIA Defendants withdrew its unclean affirmative defense in a supplemental response to
interrogatories because at the time they did not have sufficient evidentiary support for the defense, (Dkt.
26 No. 357 at 25-26 (UNDER SEAL)), they submitted a supplemental interrogatory response reasserting
their unclean hands defense, (id.). Because no court order dismissing that defense was filed, the
27 affirmative defense of unclean hands remains.
8 Because IQVIA Counter-Plaintiffs failed to demonstrate good cause under Rule 16(b), the Court need
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1 the Court DENIES IQVIA Counter-Plaintiffs’ motion for leave to file a second amended
2 answer and counterclaims.
3 Conclusion
4 Based on the reasoning above, the Court DENIES IQVIA Counter-Plaintiffs’
5 motion for leave to file a second amended answer and counterclaim. The hearing set on
6 November 19, 2021 shall be vacated.
7 IT IS SO ORDERED.
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November 15, 2021
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