930 F.3d 1031
9th Cir.2019Background
- Ixchel Pharma (developer of a dimethyl fumarate drug) entered a January 2016 Collaboration Agreement with Forward Pharma; Forward could terminate on 60 days’ notice.
- Forward negotiated a separate settlement with Biogen in Jan. 2017 in which Biogen paid Forward $1.25 billion and Forward agreed (via §2.13) to terminate and not enter contracts with Ixchel relating to dimethyl fumarate products.
- Ixchel sued Biogen in federal court for tortious interference with contract, interference with prospective economic advantage, and UCL violations; district court dismissed for failure to plead an independently wrongful act and that §16600 did not apply.
- Ixchel amended to allege §16600 barred Forward’s agreement with Biogen and that the §16600 violation was an independently wrongful act; the district court again dismissed.
- The Ninth Circuit panel concluded the determinative issues are unsettled questions of California law and certified two questions to the California Supreme Court rather than resolving them itself.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Cal. Bus. & Prof. Code §16600 void contracts restraining a business from dealing with another business (i.e., apply beyond employer–employee covenants)? | §16600’s plain text applies to “anyone” and should be read broadly to bar restraints between businesses; thus §2.13 likely void and constitutes an independently wrongful act. | §16600 is limited to employment covenants; a broad reading would invalidate ordinary commercial arrangements and contradict policy and federal rule-of-reason antitrust principles. | Certified to the California Supreme Court for authoritative resolution. |
| Whether a plaintiff must plead an independently wrongful act to state intentional interference with a contract terminable at will outside the employment context (Reeves scope). | Reeves’ independently-wrongful-act requirement should be limited to at-will employment; it should not extend to non-employment at-will contracts. | Reeves’ requirement should apply whenever a contract is terminable at will by a party, regardless of employment context. | Certified to the California Supreme Court for authoritative resolution. |
Key Cases Cited
- Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (establishes broad interpretation of §16600 and rejection of a narrow-restraint exception)
- Reeves v. Hanlon, 33 Cal. 4th 1140 (holds plaintiff must plead an independently wrongful act to state interference claim involving at-will employment)
- Pac. Gas & Elec. Co. v. Bear Stearns & Co., 50 Cal. 3d 1118 (sets elements for intentional interference with contractual relations)
- Golden v. California Emergency Physicians Med. Grp., 782 F.3d 1083 (Ninth Circuit reading of Edwards regarding §16600’s scope in employment context)
- Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134 (defines what qualifies as an independently wrongful act for UCL/interference contexts)
- Great W. Distillery Prods., Inc. v. John A. Wathen Distillery Co., 10 Cal. 2d 442 (historical application of predecessor to §16600 in non-employment settings)