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Meridian Laboratories, Inc. v. OncoGenerix USA, Inc.

United States District Court, N.D. Illinois

September 25, 2019

MERIDIAN LABORATORIES, INC., Plaintiff,
v.
ONCOGENERIX USA, INC., Defendant.

          Jorge L. Alonso, Judge

          AMENDED MEMORANDUM OPINION AND ORDER [1]

          Jeffrey I. Cummings, United States Magistrate Judge

         Plaintiff Meridian Laboratories, Inc. (“Meridian”) has filed a six-count amended complaint against defendant OncoGenerix USA, Inc. (“OncoGenerix”) alleging, inter alia, that it breached a Service Provider Agreement under which OncoGenerix was to undertake process development and testing of Meridian’s proprietary formulation of a pharmaceutical cancer treatment product known as ML 141. (Dkt. 57.) Meridian seeks damages and injunctive relief. OncoGenerix has filed a counterclaim alleging that Meridian breached that same Service Provider Agreement and seeking damages. (Dkt. 15.)

         Discovery in this matter is ongoing. A dispute has arisen as to whether documents responsive to Meridian’s requests for production but are physically possessed by a non-party Chinese limited liability company known as Mudanjiang Onco Generix Co. Ltd. (“OncoMDG”) are within the “control” of OncoGenerix under the meaning of Federal Rule of Civil Procedure 34. At a hearing on July 9, 2019, the Court directed the parties to submit position papers on the discovery dispute. (Dkt. 43.) By its August 6, 2019 Order, the Court directed OncoGenerix to fully respond to certain relevant interrogatories and requests for admission. (Dkt. 49.) The Court has reviewed the parties’ submissions, OncoGenerix’s responses to Meridian’s initial and supplemental discovery requests, and heard argument from counsel at several hearings. For the reasons set forth below, the Court finds that documents possessed by OncoMDG are within “control” of OncoGenerix under the meaning of Rule 34 and it rejects OncoGenerix’s additional objections to producing the documents in question. Accordingly, OncoGenerix shall fully respond to any outstanding requests for production in accordance with this Opinion by October 18, 2019.

         I. FACTUAL BACKGROUND

         The facts set forth below are drawn from the parties’ pleadings and discovery responses, the parties’ July 24, 2019 submissions, and the statements during in-court hearings on this matter.

         A. The Companies Involved in the Underlying Transaction

         1. Meridian Laboratories, Inc.

         Meridian Laboratories is an Illinois corporation that has developed a proprietary formulation known as ML 141 for delivering the cancer treating compound docetaxel. (Dkt. 57 at 2-3.) According to Meridian, ML 141 is free of ingredients known to cause serious side effects and patients are able to tolerate ML 141 better than other currently available treatments. (Id. at 3.) Consequently, patients taking ML 141 are able to receive higher doses and they have improved outcomes in treating their cancers. (Id.)

         2. OncoGenerix USA, Inc.

         OncoGenerix is a California corporation. (Dkt. 15 at 10.) Igor Ivanov owned OncoGenerix until January 1, 2019 and was thus the corporation’s owner the entirety of the business relationship between Meridian and OncoGenerix and during the occurrence of all events that are material to this lawsuit. (OncoGenerix’s Submission at 1.) On January 1, 2019, Marina Ivanova (Igor Ivanov’s wife) became OncoGenerix’s owner. (Id.) Ms. Ivanova also serves as OncoGenerix’s sole Director, Chief Financial Officer, and Secretary. (OncoGenerix’s Supp. Resp. to Int. No. 2.) Dmitry Itkin serves as OncoGenerix’s CEO and President. (OncoGenerix’s Supp. Resp. to Int. No. 2.) Dr. Roland Franke serves as OncoGenerix’s Chief Scientific Officer and V.P. of Business Development. (OncoGenerix’s Resp. To First Set of Int. No. 1; https://www.oncogenerixusa.com/about-us (last visited September 10, 2019).) OncoGenerix has only one other employee (Zhenya Bryksin). (OncoGenerix’s Supp. Resp. to Int. No. 2.)

         By its own description, OncoGenerix was set up with one purpose: namely, “to be a sales representative of services offered by a plant located in Mudanjiang, China owned by OncoMDG.” (OncoGenerix’s Submission at 2.) OncoGenerix “markets and sells” OncoMDG’s services and makes a profit on the services it sells. (Dkt. 15 at 10; OncoGenerix’s Submission at 3.) OncoGenerix maintains a website, available at www.oncogenerixusa.com, the terms and conditions of which previously identified the “owner of the website” as Mudanjiang Onco Generix Co. Ltd. (that is, OncoMDG.)[2]

         3. Mudanjiang Onco Generix Co. Ltd.

         OncoMDG is a Chinese limited liability company that is a contract manufacturer of “final formulation drugs” at a facility in Mudanjiang, China. (Dkt. 15 at 10; see also https://www.oncogenerix.com (last visited September 10, 2019).) OncoMDG is owned by Onco Generix China Ltd. (OncoGenerix’s Submission at 1.)[3] OncoMDG states on its website that Igor Ivanov is “the Chairman of the Board, investor, and founder of OncoGenerix [i.e., Mudanjiang Onco Generix Co. Ltd.].”[4] (See www.oncogenerix.com/about-us (last visited September 10, 2019).) Maxim Ivanov (Igor and Marina’s son), Dr. Roland Franke, Dmitry Itkin, and Glinkovskaya Yulia also serve as OncoMDG’s directors. (OncoGenerix’s Supp. Resp. to Int. No. 3; Tr. at 14.) Austin McDonald (General Manager/CEO), Erick Palacios (Director of Operations), and Edwin Rodriguez (Director of Quality Operations) serve as officers for OncoMDG. (OncoGenerix’s Supp. Resp. to Int. No. 3.) OncoGenerix identified almost 200 additional employees of OncoMDG including, Zhao Long, Zhen Li, Chenxi Guo, and Bill Allen. (Id.)

         B. The Service Provider Agreement

         On August 16, 2016, OncoGenerix submitted a proposal to Meridian for the “GMP Process Development & Manufacturing Services for ML 141 Docetaxel Injection” (the “Proposal”). (Dkt. 15 at 11.) In short, OncoGenerix proposed to “undertake the necessary work to support a 505(b)(2) application to the U.S. FDA” for ML 141 and “once approval is obtained to manufacture the product on behalf of [Meridian] for the U.S. market.” (Id.) The Proposal was prepared by OncoMDG employees McDonald, Long, and Rodriguez, each of whom were listed with an OncoMDG e-mail address (“@oncogenerixmdg.com”) and a Chinese phone number. (OncoGenerix’s Supp. Resp. to Int. No. 3; Meridian’s Submission at Ex. 1.) The Proposal also identified a project team to “undertake the scope of the work, ” which included OncoMDG officers Rodriguez and Palacios and OncoMDG employees Long, Li, Guo, and Allen, among others. (Meridian’s Submission at Ex. 1.)

         On September 26, 2016, Meridian and OncoGenerix memorialized the terms of their agreement regarding ML 141 in a Service Provider Agreement (the “Agreement”). The Agreement was executed by Meridian and OncoGenerix only; OncoMDG did not sign the agreement. (Tr. at 18.) Under the terms of the Agreement, Meridian agreed to pay OncoGenerix a total purchase price of $1, 275, 000, to be paid in five installments upon the completion of various milestones. (Dkt. 15 at 12.) At the August 27, 2019 hearing in this matter, the Court asked counsel for OncoGenerix how the $1, 275, 000 purchase price under the Agreement would be split between OncoGenerix and OncoMDG. Counsel for OncoGenerix stated that although he was not “100 percent positive, ” he “believ[ed]” OncoGenerix would recover a ten percent commission ($127, 500) under the Agreement and the remainder would go to OncoMDG. (Tr. at 11-12.) As gleaned from the few sections of the Proposal and Agreement provided to the Court, there is no dispute that the actual development, testing, and manufacturing of ML 141 was planned to take place at OncoMDG’s facility in China.[5]

         C. The Parties’ Legal Claims

         In its first amended complaint, Meridian alleges that Meridian and OncoGenerix entered into the Agreement on September 26, 2016 under which OncoGenerix agreed to undertake process development, stability filling, and stability testing of ML 141. (Dkt. 57 at 3.) In early 2017, Meridian entered into a separate contract with a large international manufacturer and distributer of pharmaceuticals wherein Meridian granted an exclusive license to the distributer to market ML 141 in the United States and Canada. (Id. at 3-4.) Under its contract with the distributor, Meridian was entitled to milestone payments of more than $10, 000, 000, the majority of which was directly dependent upon the timely performance of OncoGenerix in testing and manufacturing sufficient quantities of ML 141. (Id. at 4.) Meridian alleges that OncoGenerix breached the Agreement by failing to perform the testing and manufacturing of ML 141 in the agreed upon timeframe thereby causing Meridian to miss payments from the distributor. (Id. at 5.) Meridian – which terminated the Agreement on September 15, 2017 – further alleges that OncoGenerix misappropriated confidential and proprietary information in order to develop and market a drug competitive with ML 141. (Id. at 7.)

         OncoGenerix brings a counterclaim which accuses Meridian of breaching the Agreement. According to OncoGenerix, Meridian failed to provide OncoGenerix and OncoMDG with the complete formula for ML 141, thereby preventing OncoGenerix from fulfilling its obligations under the Agreement. Specifically, OncoGenerix alleges that upon execution of the Agreement, “OncoGenerix and OncoMDG began working with Meridian in furtherance of the agreement” and “did all they could do with the information provided by Meridian.” (Dkt. 15 at 13.) However, when it became apparent that “OncoMDG could not replicate the claimed results…OncoMDG informed Meridian that the formula was incomplete and requested the complete formula as submitted by Meridian to the FDA.” (Id.) Although Meridian provided OncoGenerix and OncoMDG with “pieces of information relating to the ML 141 formula, ” Meridian did not supply the “actual formula sufficient to produce the drug.” (Id.) When the project began to stall, OncoMDG again in July 2017 requested the full formula in one complete document. (Id. at 14.) OncoGenerix alleges that Meridian did not provide the requested information. (Id.) OncoGenerix seeks damages in the amount of $244, 133.37 for the value of uncompensated “work completed by OncoGenerix” under the Agreement. (Id. at 15.)

         With these facts in mind, the Court turns to the discovery issue at hand.

         II. LEGAL ANALYSIS

         Meridian has served requests for the production of documents which, among other things, call for OncoGenerix to produce all documents relating to: (a) ML 141; (b) docetaxel; (c) the Agreement; (d) OncoGenerix’s capabilities and qualifications of personnel who were to perform as required under the Agreement; (e) OncoGenerix’s decision to place its performance on hold on July 17, 2017; and (f) all communications between OncoGenerix and any person not a party to this action relating to Meridian, ML 141, docetaxel, and this action. OncoGenerix responded to the requests with objections and by asserting that it would produce all non-privileged responsive documents that were “within its custody or possession.” (See OncoGenerix’s Resp. to Meridian’s First Req. for Prod.)

         Meridian asserts that OncoMDG has responsive documents within its possession that have not been produced in discovery and that OncoGenerix must produce these documents because it has “control” of them within the meaning of Rule 34. OncoGenerix asserts that it should not be required to produce documents possessed solely by OncoMDG because: (a) it does not “control” those documents within the meaning of Rule 34; (b) it has already produced all responsive OncoMDG documents that were exchanged between Meridian and OncoMDG during the execution of the Agreement and reproducing those documents would result in unnecessary duplication; and (c) an order compelling OncoGenerix to produce OncoMDG’s documents would jeopardize the business relationship between the two companies. (Tr. at 4-5, 9-10, 19-21, 24-25.)

         A. Standard For Determining Whether A Party Has “Control” OverDocuments In The Possession ...


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