Quintara Biosciences, Inc. v. Ruifeng Biztech Inc.

Background

Quintara Biosciences, Inc. was founded by Qun “Richard” Shan and Xueling “Sue” Zhao. The opinion describes a series of business arrangements involving Gangyou Wang and his company, Ruifeng Biztech Inc. The parties initially agreed that Ruifeng would appear to take over Quintara’s operations and later entered a collaboration agreement under which Ruifeng would own 51 percent and Quintara 49 percent, although they never formed a new entity.

Quintara alleged that Wang later forged Shan’s name on a lease-termination agreement, claimed that Ruifeng owned 51 percent of Quintara’s business assets, recruited Quintara employees, changed the locks at Quintara’s premises on March 9, 2020, and began operating the business through RF Biotech LLC using Quintara’s premises, equipment, and former employees. Quintara sought a temporary restraining order and preliminary injunction requiring defendants to turn over the premises and Quintara’s property. Quintara moved for preliminary injunctive relief on August 19, 2020.

Legal standard

A preliminary injunction is an extraordinary court order issued before final judgment. To obtain one, a plaintiff must show that it is likely to succeed on the merits, likely to suffer irreparable harm without the order, that the balance of equities favors an injunction, and that an injunction serves the public interest. The court stated that the same requirements apply to a temporary restraining order.

Court’s analysis

The court held that Quintara had not shown a sufficient likelihood of irreparable harm. The alleged events had culminated in the March 9 lockout, but Quintara waited five months to seek relief and gave no explanation for the delay. The court stated that such a delay suggested a lack of urgency and irreparable harm, and that this ground alone made preliminary injunctive relief inappropriate.

The court also identified two additional grounds. First, it concluded that Quintara’s account showed that Shan and Zhao had participated in an alleged scheme involving a shell company and an unwritten, interest-free $1 million loan intended to help Wang fraudulently obtain resident status in the United States. Applying the equitable principle that a party seeking equitable relief must have acted fairly in the dispute, the court stated that it would not condone Quintara’s conduct. Second, because defendants vigorously disputed nearly every aspect of Quintara’s account and provided documentation, the court said the unsettled facts made it difficult to find that Quintara was likely to succeed on the merits.

The court further stated that federal-question jurisdiction over the non-diverse case rested entirely on Quintara’s federal trade-secret claim. It said that if the trade-secret claims failed, it would likely decline to exercise supplemental jurisdiction over the remaining claims, which otherwise concerned a deteriorating business relationship and California law.

Disposition

The court denied preliminary injunctive relief and vacated the September 17 hearing. It scheduled defendants’ motion to dismiss to be heard with the initial case-management conference on October 22, 2020. The order did not decide the ultimate merits of Quintara’s underlying claims.