Sharbat v. Iovance Biotherapeutics, Inc.

Background

Solomon Sharbat, Solomon Capital LLC, Solomon Capital 401k Trust, and Shelhav Raff sued Iovance Biotherapeutics, Inc. and Manish Singh. The plaintiffs alleged that they helped Lion Biotechnologies, Inc. raise financing and develop strategic relationships, and that they were entitled to finder’s fees, stock, and an exclusive license to distribute cancer-treatment methods in Israel. They asserted breach-of-contract claims against Iovance, as well as unjust enrichment and indemnification claims, and asserted fraud and conversion claims against Singh.

The defendants moved under Federal Rule of Civil Procedure 12(c) for judgment on the pleadings as to the plaintiffs’ second and third breach-of-contract claims against Iovance and fifth and sixth claims for fraud and conversion against Singh. A Rule 12(c) motion uses the same standard as a motion to dismiss for failure to state a claim: the court considers whether the pleadings, taken as true and viewed in the nonmoving party’s favor, show that no facts could entitle the plaintiff to relief. The plaintiffs also sought leave to file a proposed second amended complaint.

Rulings on the claims

The court granted Iovance’s motion as to the second cause of action, which alleged that the plaintiffs were entitled to half of 1.5 million unrestricted shares. The court found that the June 15, 2012 Letter Agreement was between MBA and Genesis, did not mention the plaintiffs, and did not contain terms requiring that the plaintiffs receive those shares. Although another consulting agreement referred to 1.5 million shares for MBA, the plaintiffs did not allege facts showing that they were parties or beneficiaries of that agreement or that they were entitled to half of the shares. The court therefore dismissed the second cause of action.

The court also dismissed the third cause of action, which alleged that the plaintiffs were promised an exclusive license to distribute cancer therapeutics in Israel if they raised $3 million to $5 million. The court found that the amended complaint did not explain where or how that alleged agreement was formed, did not identify its terms sufficiently, and did not explain how the required fundraising differed from the plaintiffs’ other fundraising efforts.

The court granted Singh’s motion as to the fifth cause of action for fraud. The plaintiffs’ omission theory did not identify with enough detail what information Singh allegedly withheld, when and in what context he withheld it, or what he obtained through the alleged fraud. The court also found that the plaintiffs did not adequately allege that Singh had a duty to disclose the information or that they relied on the omissions. As to the alleged misrepresentation about a future share price of $4 to $5, the court held that the allegation concerned a future valuation rather than an actionable misrepresentation of existing fact. The plaintiffs’ separate allegation that Singh misrepresented expected financing amounts also lacked the detail, reliance, and injury allegations required for a fraud claim.

The plaintiffs did not oppose Singh’s motion concerning the sixth cause of action for conversion. The court dismissed that claim.

Leave to amend and final disposition

The court denied the plaintiffs’ application to file the proposed second amended complaint. The scheduling order’s deadline for amended pleadings had passed, and the plaintiffs did not show the diligence or other good cause required to amend after that deadline. The court also found that the proposed new claims against Singh for tortious interference with contract and tortious interference with prospective business relations would be futile because the applicable limitations periods had expired.

The court concluded that Iovance’s and Singh’s motions for judgment on the pleadings were granted. It dismissed the plaintiffs’ second and third causes of action for breach of contract and fifth and sixth causes of action for fraud and conversion. The first cause of action against Iovance for breach of contract, along with the unjust-enrichment and indemnification claims, survived. The clerk was directed to terminate Singh as a defendant and terminate the motions. The opinion does not specify whether the dismissed claims were dismissed with or without prejudice.