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Strobos v. RXBIO, Inc.

United States District Court, District of Columbia

May 9, 2017

JURRIAAN STROBOS, Plaintiff,
v.
RXBIO, INC., Defendant.

          MEMORANDUM OPINION

          JAMES E. BOASBERG United States District Judge

         You don't need to be a venture capitalist to know that an early investment in the development of a new drug may never pay off. Plaintiff Jurriaan Strobos, though, claims that he was stricken with more than a bad bet when Defendant RxBio, Inc., shortchanged him nearly $700, 000 for his work on developing its flagship drug. The Company, in turn, acknowledges that it came down with a nasty case of the financial woes in 2014, but rejoins that it was Strobos who violated his employment contract and disclosed certain of its trade secrets.

         Both parties, hoping for a swift tonic to these alleged ills, now cross-move for summary judgment on all counts. As the Court concludes that factual findings are needed to put many of their maladies to rest, it will largely deny both Motions.

         I. Background

         Because the Court is dealing with Cross-Motions, it cannot set forth the facts in the light most favorable to the non-moving party. Instead, it will offer only the undisputed background to this squabble and then detail specific relevant facts within the corresponding analysis subsections. It also provides a procedural history of the litigation here in a separate section.

         A. Employment and Resignation

         Defendant is an early-stage Tennessee company that is developing a drug - RxlOO - to prevent and treat acute radiation syndrome. See ECF No. 38 (RxBio Statement of Issues) (SOI), ¶ 2. On October 1, 2011, its President and CEO, W. Shannon McCool, verbally agreed to finalize the hiring of Plaintiff as its sole Vice President. Id., ¶¶ 4-5. A trained medical doctor and lawyer, Strobos brought with him particular expertise in navigating the regulatory gantlet required for the approval of new drugs. LI, ¶ 1.

         It was no coincidence, then, that he officially came on board just days after the Company secured an important three-year deal to develop RxlOO with the financial assistance of the U.S. Biomedical Advanced Research Development Authority (BARDA). Id., ¶¶ 19-21. In fact, RxBio's "decision to hire [him], as well as the amount of [his] salary, " was directly tied to this deal, and the Company's initial pitch to the federal agency "included proposed labor costs for [him] at a rate of $385, 000 peryear." ECF No. 47-1 (Strobos SOI), ¶34. By the contract's terms, moreover, RxBio had to track the time that Strobos worked on the development of RxlOO and submit this log to BARD A for monthly reimbursements. See RxBio SOI, ¶ 21; ECF 47-2 (Deposition of W. Shannon McCool) at 16:1-12.

         This arrangement worked well for more than two years. In January 2014, though, a government audit flagged concerns about RxBio. See RxBio SOI, ¶¶ 35-37. BARD A immediately began withholding its monthly checks in response. LI Forced to turn its microscopes inward, the Company soon realized that it had another potential problem with its books - namely, it did not have a current employment contract for Strobos (or other top executives). Id., ¶ 38. Plaintiff and Defendant quickly executed an agreement in mid-2014 with an effective date relating back to start of his tenure in October 2011. See RxBio SOI, ¶ 38; ECF No. 11-1, Exh. B (2014 Employment Contract).

         Two months later, the government's pause on the RxlOO project became more permanent when BARD A let its contract expire without exercising a lucrative option. See RxBio SOI, ¶¶ 39-40. This decision left Defendant in a serious financial bind as the agency was still withholding its earlier reimbursements. LI, ¶ 40. CEO McCool and his brother, who served as RxBio's Chief Information Officer, consequently decided to slash their annual salaries in order to keep the project moving forward over the course of 2014. See Strobos SOI, ¶¶ 54-55.

         Unfortunately, more bad news was just around the bend. In mid-2014, an independent study at the University of Maryland failed to show RxlOO effective for use in non-human primates. See RxBio SOI, ¶¶51-52. With its flagship project now in serious peril, Strobos, McCool, and others at RxBio agreed to review the study for potential design defects. LI, ¶ 52; see also ECF No. 23-6 (Deposition of Gabor Tigyi) at 43:10-44:3. Strobos, in particular, discussed possible issues with the study's rehydration of its test animals with two outside clinicians: Dr. Nisha Chandra-Strobos, his wife and a well-regarded clinician in her own right, and Dr. William Greenough, an expert in diarrheal medicine. See RxBio SOI, ¶¶ 52-55.

         By the fall of 2014, however, the Company was still in rather dire financial straits. With no other options on the table, in September, Strobos and McCool resolved to make additional spending cuts. See Strobos SOI, ¶ 59. More specifically, the men agreed that RxBio would no longer pay Strobos - its highest paid employee at the time at $385, 000 - his full salary each month. See id, ¶¶59-60; RxBio SOI, ¶¶43-44; ECF No. 41-1 (Declaration of W. Shannon McCool), ¶ 53. The Company began instead to pay him at a rate of $20, 000 per month and accrued the unpaid portions of his original salary and any bonuses on its books. See RxBio SOI, ¶¶ 43-44; ECF No. 11 (Amended Counterclaim), ¶¶ 24-25. Then, in November, Strobos and McCool again agreed verbally to reduce this monthly check further still, while they also coordinated similar sacrifices from other RxBio employees. See RxBio SOI, ¶¶ 13, 46-49; Strobos SOI, ¶¶ 64-68, 76.

         As the months ticked by under the Company's obvious financial strain, the relationship between Strobos and McCool rapidly deteriorated. By early 2015, the two seem to have come to a particularly contentious stalemate over the Company's potential pursuit of animal-modeling projects. See Strobos SOI, ¶¶ 113-16. Animal modeling involves the design of studies that use animals as test subjects "to demonstrate, among other things, the efficacy of [drugs] in animals [as] satisfactorily predictive for use with humans." LI, ¶ 17. Strobos, for his part, felt that a separate entity should be formed to handle this work, while McCool thought the endeavour properly housed within RxBio's existing research framework. LI, ¶¶ 113-16.

         On July 3, 2015, this disagreement reached a boiling point when the two men debated the issue over the phone. Id., ¶¶ 114-18. During this conversation, Strobos expressed that the animal-modeling endeavor would be much better off if he could solicit funding from BARD A directly in a new venture so as to avoid any residual RxBio "baggage" from the ill-fated RxlOO deal. LI This message was not well received by McCool, who began to question Strobos's loyalty to the Company. See McCool Dep. at 139:25-140:9.

         As a result of what Strobos then perceived to be actions taken by McCool to sideline his influence and authority, Plaintiff resigned from the Company just two weeks later on July 17, 2015. See Strobos SOI, ¶ 214; RxBio SOI, ¶ 71.

         B. Procedural History

         Four months thereafter, Strobos brought this suit seeking to recover nearly $700, 000 in expenses, salary, bonuses, and severance that he claimed RxBio unjustly refused to pay him. See ECF No. 1 (Complaint), ¶¶ 31-36, 41. In Count I for breach of contract, he asked for several types of damages: the funds that Defendant had accrued on its books as his salary and bonuses, certain costs that he had fronted the Company during his tenure, and a large severance payment provided for in his 2014 Employment Contract. LI, ¶¶37-41. He further alleged, in Count II, that RxBio's failure to pay his full salary and bonuses on at least a monthly schedule violated the D.C. Wage Payment and Collection Law. Li, ¶¶ 42-47. Defendant, in response, denied all his claims and pressed four counterclaims of its own, alleging: (1) Strobos breached his contract "by failing to devote his full-time attention to his employment with RxBio"; (2) he breached his contract "by failing to return all RxBio records ... to RxBio on the date of his termination"; (3) a further breach occurred via his "fail[ure] to keep RxBio promptly and fully informed of the identity and nature of any current or subsequent entity or individual" for whom he later worked; and (4) Strobos violated his contract and the Tennessee Uniform Trade Secrets Act by delivering RxBio's "trade secrets to third parties without such third parties entering into non-disclosure agreements with RxBio." Am. Counterclaim, ¶¶ 61, 65, 69, 75.

         Before the current summary-judgment briefing could be completed, BARDA released at least some of the reimbursements that it had been withholding. See RxBio SOI, ¶ 83. Strobos then moved for a preliminary injunction to freeze the portion of that money that he believed to be his unpaid salary, and the Company counter-moved to freeze his assets to pay potential damages on its counterclaims. See ECF Nos. 25, 32. After a hearing on December 16, 2016, the Court denied relief to both in a written Memorandum Opinion and Order. Strobos v. RxBio, Inc., 2016 WL 7442644 (D.D.C. Dec. 27, 2016).

         Now, the parties have finished their briefs cross-moving for summary judgment on all counts in both the Complaint and Counterclaim. In other words, they each seek an affirmative judgment on their own claims, as well as a rejection of their adversary's counts. See ECF No. 23 (Motion); ECF No. 44 (Cross-Motion). Those Motions are now ripe.

         II. Legal Standard

         Summary judgment may be granted if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986); Holcomb v. Powell, 433 F.3d 889, 895 (D.C. Cir. 2006). A fact is "material" if it is capable of affecting the substantive outcome of the litigation. See Liberty Lobby, 477 U.S. at 248; Holcomb, 433 F.3d at 895. A dispute is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Scott v. Harris, 550 U.S. 372, 380 (2007); Liberty Lobby, 477 U.S. at 248; Holcomb, 433 F.3d at 895.

         When amotion for summary judgment is under consideration, "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in [its] favor." Liberty Lobby, 477 U.S. at 255; see also Mastro v. PEPCO, 447 F.3d 843, 850 (D.C. Cir. 2006); Akav. Wash. Hosp. Ctr., 156 F.3d 1284, 1288 (D.C. Cir. 1998) (en banc). On a motion for summary judgment, the Court must "eschew making credibility determinations or weighing the evidence." Czekalski v. Peters, 475 F.3d 360, 363 (D.C. Cir. 2007).

         The nonmoving party's opposition, however, must consist of more than mere unsupported allegations or denials and must be supported by affidavits, declarations, or other competent evidence, setting forth specific facts showing that there is a genuine issue for trial. See Fed.R.Civ.P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). "Evidence that is 'merely colorable' or 'not significantly probative' is insufficient." Chambers v. Burwell, 824 F.3d 141, 145 (D.C. Cir. 2016) (quoting Liberty Lobby, Inc., 477 U.S. at249-50). The nonmovant must instead provide evidence that would permit a reasonable jury to find in its favor. See Laningham v. Navy, 813 F.2d 1236, 1242 (D.C. Cir. 1987).

         III. Analys

         For a relatively confined contractual dispute, the record here is extensive. This is not entirely surprising given that the parties vigorously (and often needlessly) contest every fathomable facet of the circumstances that led to their dispute, including issues seemingly irrelevant to their causes of action.

         To untangle these conflicting tales, the Court finds it best to start with the pure breach-of-contract claims pressed by RxBio, then moves on to its mixed contract/statutory count, and wraps up with the causes of action asserted by Strobos.

         A. RxBio's Breach-of-Contract Claims

         The Company asserts three causes of action that rely purely on a breach-of-contract theory (Counterclaims I-III). According to RxBio, Strobos violated specific provisions in his employment contract when he failed: 1) "to return RxBio's Property" to it immediately after his resignation; 2) "to promptly inform RxBio of [his] subsequent employers"; and 3) "to devote his full time and attention" to the Company during his employment. See Cross-Mot. at 15-20. The Court addresses the first two assertions together, as they share a common deficiency, and then proceeds to the third.

         1. Return of Property & Notification (Counterclaims II & III)

          To successfully press its first two breach-of-contract claims, the Company must offer some evidence that Strobos's alleged actions in violation of his employment agreement actually damaged it. The precise nature of the factual allegations upon which it hopes to hang this showing is not entirely clear. As to the return-of-property count, it first points to a provision in the 2014 Employment Contract that required Strobos, upon his termination, to return all its records and not retain the originals or copies of any such documents. LI at 18. It next cites to statements Strobos's counsel made during discovery in this litigation about how best to turn over certain copies of emails that Strobos had retained to litigate this case. LI at 18-20 (identifying records turned over in March 2016 and general statements in SOI that Strobos "did return all information to RxBio, and to the extent he retained electronic copies of such data, he was required to do so because of this pending action") (emphasis omitted). As to the count about his subsequent employers, RxBio likewise only vaguely and briefly asserts that Strobos has not disclosed any employers since his ...


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