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Infuturia Global Ltd v. Sequus Pharmaceuticals

February 7, 2011

INFUTURIA GLOBAL LTD., PLAINTIFF-APPELLANT,
v.
SEQUUS PHARMACEUTICALS, INC.; THE HEBREW UNIVERSITY OF JERUSALEM; YECHEZKEL BARENHOLZ, DEFENDANTS-APPELLEES.



D.C. No. 4:08-cv-04871-SBA Appeal from the United States District Court for the Northern District of California Saundra B. Armstrong, District Judge, Presiding

The opinion of the court was delivered by: Judge N.R. Smith

FOR PUBLICATION

OPINION

Argued August 31, 2010 Submitted January 31, 2011 Pocatello, Idaho

Before: Jay S. Bybee, Timothy M. Tymkovich,*fn1 and N. Randy Smith, Circuit Judges.

OPINION

N.R. SMITH, Circuit Judge:

In this appeal, we primarily address the novel question whether, under 9 U.S.C. § 205, a district court has removal jurisdiction*fn2 over a case where the defendant raises an affirmative defense related to an arbitral award falling under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 as implemented by 9 U.S.C. § 201 et seq. ("Convention").*fn3

Because an arbitration agreement or award falling under the Convention "relates to" the subject matter of an action whenever it could conceivably affect the outcome of the plaintiff's suit, a district court does have removal jurisdiction over such a case.

I. Factual and Procedural Background

This case arises from a dispute over medical licensing rights between Appellant Infuturia Global Ltd. ("Infuturia"), a citizen of the British Virgin Islands; Yissum Research and Development Co. ("Yissum"), a citizen of Israel; and Appellee Sequus Pharmaceuticals, Inc. ("Sequus"), a citizen of California. In the 1980s, Professor Yechezkel Barenholz ("Barenholz") of The Hebrew University of Jerusalem (the "University") and Yissum developed technologies in Israel using liposomes as a vehicle for delivering pharmaceuticals to the human body. In March of 1990, Infuturia entered into a license agreement ("Infuturia License") with Yissum exchanging royalties for an exclusive worldwide right to develop, market, and use certain Yissum patents. The agreement included an arbitration provision requiring arbitration of any dispute "connected in any way to the implementation of [the] Agreement." In January of 1995, Sequus entered into a licensing agreement ("Sequus License") with Yissum for rights to certain liposome technology owned by Yissum. Barenholz and Yissum had previously worked with Sequus on liposome research.

On October 26, 1998, Infuturia sued Sequus, the University, and Barenholz in California state court alleging tortious interference with the Infuturia License. Yissum was not named as a defendant. Infuturia alleged that the defendants had interfered with the Infuturia License by encouraging Yissum to divulge and license technology that was already licensed to Infuturia. Though not a party to the California proceedings, Yissum petitioned for a stay pending arbitration pursuant to the arbitration provision in the Infuturia License. The California state court granted the stay on July 15, 1999. In an Israeli arbitration, Infuturia alleged claims similar to those asserted in the California state court proceedings, namely that Yissum breached the Infuturia License by developing, patenting, and selling technology related to or based on technology already licensed to Infuturia.*fn4 After completing the arbitration, the arbitrator determined, among other things, that (1) Infuturia's license was valid, (2) Yissum had not breached the Infuturia License, and (3) Infuturia did not have rights to any patents and products relating to the Sequus License.

Given the arbitration decision, the state court lifted the stay in the California case. Infuturia then filed a First Amended Complaint in state court which was similar to the original state court complaint, but did not reference certain Sequus products the arbitrator determined were not related to the Infuturia License. The University and Barenholz subsequently filed a Notice of Removal (in which Sequus joined), pursuant to 9 U.S.C. § 205. Infuturia filed a motion to remand, arguing only that removal was improper under 9 U.S.C. § 205, because the defendants were not parties to the foreign arbitration agreement between Infuturia and Yissum. In February 2009, the court denied the motion to remand. The district court found that removal was proper because the litigation "relates to" the arbitration provision and the arbitration provision falls under the Convention. The court also found that Infuturia's pleadings were vague and ordered Infuturia to file a second amended complaint identifying the particular Sequus products, compounds, or inventions that allegedly infringe upon Infuturia's license with Yissum.

Infuturia filed its Second Amended Complaint on March 16, 2009. It asserted tortious interference and conversion claims and only named Sequus as a defendant. In its Answer to the Second Amended Complaint, Sequus raised the affirmative defense of collateral estoppel, arguing that these issues had already been resolved against Infuturia in the Israeli arbitration. When it filed its Answer, Sequus also moved to dismiss under Rule 12(b)(6) for failure to state a claim and Rule 12(b)(7) for failure to join a necessary party. The district court granted both motions on June 1, 2009. Infuturia appeals the district court's grant ...


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