Case 2:15-cv-02416-LDW-AYS Document 28 Filed 09/18/15 Page 1 of 4 PageID #: 137
`
`
`
`September 18, 2015
`
`1301 Avenue of the Americas, 40th Floor
`New York, NY 10019-6022
`
`PHONE 212.999.5800
`FAX 212.999.5899
`
`www.wsgr.com
`
`
`
`
`
`Sent Via ECF and Federal Express
`
`Honorable Leonard D. Wexler
`United States District Court
`Eastern District of New York
`944 Federal Plaza
`Central Islip, NY 11722
`
`Re: Altaire Pharmaceuticals, Inc. v. Paragon BioTeck, Inc., et al.
`
`Case No. 2:15-cv-02416 (E.D.N.Y. 2015)
`
`
`
`Dear Judge Wexler:
`
`
`We represent Defendant Paragon BioTeck, Inc. (“Paragon”) in connection with the
`above-entitled action and write in response to Plaintiff Altaire Pharmaceuticals, Inc. (“Altaire”)
`and Third-Party Defendant Sawaya Aquebogue LLC’s (“Sawaya Aque”) September 8, 2015
`letter requesting a pre-motion conference regarding their intended motion to dismiss Count 4
`(unjust enrichment against Sawaya Aque) and Count 5 (fraud against Altaire) of Paragon’s
`Counterclaims and Third-Party Complaint. See Dkt. No. 27. As explained below in more detail,
`the intended motion will fail. First, Paragon’s unjust enrichment claim should not be dismissed
`because the contract that is the subject of this litigation does not govern the subject matter of
`Paragon’s unjust enrichment claim. Second, Paragon has sufficiently satisfied the pleading
`requirements of Fed. R. Civ. P. 9(b) in connection with its fraud claim against Altaire.
`
`Paragon Has Stated an Unjust Enrichment Claim Against Sawaya Aquebogue
`
`
`Paragon’s unjust enrichment claim should not be dismissed because it is asserted against
`a non-party to the contract, and is predicated on subject matter that it not governed by the
`contract between Altaire and Paragon. The Altaire/Paragon contract contains no provision
`relating to the subject of Paragon’s unjust enrichment claim – Sawaya Aque’s return of
`Paragon’s assets.1 Dkt. No. 22 at ¶ 90. As properly pleaded in the complaint, which must be
`
`1 Altaire cites dicta from two cases to argue that Paragon’s unjust enrichment claim is barred
`against a non-signatory to a contract. See Xiotech Corp. v. Express Data Prods. Corp., 11 F.
`Supp. 3d 225, 242 (N.D.N.Y. 2014); Law Debenture v. Maverick Tube Corp., C.A. No. 06-CV-
`14320, 2008 WL 4615896, at *12 (S.D.N.Y. Oct. 15, 2008) (collecting cases). Altaire
`completely ignores that the law in this area is unsettled. Recent courts have held that it is proper
`to assert an unjust enrichment claim against a non-signatory to a contract. See SungChang
`
`AUSTIN BEIJING BRUSSELS HONG KONG LOS ANGELES NEW YORK PALO ALTO SAN DIEGO
`SAN FRANCISCO SEATTLE SHANGHAI WASHINGTON, DC WILMINGTON, DE
`
`
`Exhibit 1023, Page 1 of 4
`
`

`
`Case 2:15-cv-02416-LDW-AYS Document 28 Filed 09/18/15 Page 2 of 4 PageID #: 138
`
`
`
`
`
`Honorable Leonard D. Wexler
`Senior United States District Court Judge
`September 18, 2015
`Page 2
`___________________
`taken as true in analyzing a motion to dismiss, Sawaya Aque has been unjustly enriched
`because Paragon did not receive the benefit of its bargain with Altaire, and therefore a
`non-party to the agreement, Sawaya Aque, has an unjust and unearned windfall that
`unjust enrichment claims are precisely designed to address. Id. at ¶ 91. The contract is
`silent and does not address the mechanism for Paragon to recover the assets it
`relinquished to Sawaya Aque.2 See Kottler v. Deutsche Bank AG, 607 F. Supp. 2d 447, 468
`(S.D.N.Y. 2009) (“where there is a bona fide dispute as to the existence of a contract or where
`the contract does not cover the dispute in issue, a court should not dismiss a claim of unjust
`enrichment at the motion-to-dismiss stage.”) (internal quotations and citation omitted); Joseph
`Sternberg, Inc. v. Walber 36th St. Assocs., 594 N.Y.S.2d 144, 145-46 (1993) (ruling that the trial
`court erred in dismissing plaintiff’s unjust enrichment claim because the contract did not cover
`the dispute between the parties when it was silent as to the plaintiff’s entitlement to a
`commission in the event the plaintiff sold a building for less than the price articulated in the
`parties’ contract.).
`
`When Courts encounter these situations, they are understandably reluctant to dismiss
`unjust enrichment claims at the outset of the case, and allow a party to proceed on both a contract
`and unjust enrichment theory. See Union Bank, N.A. v. CBS Corp., C.A. No. 08-CV-08362,
`2009 WL 1675087, at *8 (S.D.N.Y. June 10, 2009) (noting that with respect to plaintiff’s unjust
`enrichment claim “that it was not appropriate for the Court to rule—at the inception of the case
`and as a matter of law—that the parties’ agreements governed the instant dispute.”); Goldman v.
`Simon Prop. Grp., Inc., 58 A.D.3d 208, 220 (2d Dep’t 2008) (“Although the existence of a valid
`and enforceable contract governing a particular subject matter generally precludes recovery in
`quasi-contract, where there is a bona fide dispute as to the existence of a contract or the
`application of a contract in the dispute in issue, a plaintiff may proceed upon a theory of quasi
`contract as well as breach of contract.”) (emphasis added). Here, Paragon’s contract was not
`
`Interfashion Co. v. Stone Mountain Accessories, Inc., C.A. No. 12-CV-7280, 2013 WL 5366373,
`at *20 (S.D.N.Y. Sept. 25, 2013). Moreover, Altaire misunderstands Paragon’s claim. There is
`no contractual provision that governs the return of Paragon’s assets from Sawaya Aque, and thus,
`the unjust enrichment claim properly lies against Sawaya Aque. Altaire’s citations, even if they
`were holdings and not mere dicta, when properly characterized support Paragon because they are
`in a different procedural posture – the unjust enrichment claim was dismissed after significant
`discovery and after summary judgment. See Xiotech, 11 F. Supp. 3d at 242; Law Debenture,
`2008 WL 4615896, at *13.
`2 Whether Sawaya Aque is individually liable for the breach of contract claim asserted against
`Altaire has no bearing on Paragon’s unjust enrichment claim asserted against Sawaya Aque.
`Altaire curiously cites to Abraham Zion Corp. v. Lebow, 761 F.2d 93, 103 (2d Cir. 1985), but
`that case is inapposite because it does not involve any unjust enrichment claim.
`
`
`
`Exhibit 1023, Page 2 of 4
`
`

`
`Case 2:15-cv-02416-LDW-AYS Document 28 Filed 09/18/15 Page 3 of 4 PageID #: 139
`
`
`
`
`
`Honorable Leonard D. Wexler
`Senior United States District Court Judge
`September 18, 2015
`Page 3
`___________________
`with Sawaya Aque and the contract does not cover the subject matter of Paragon’s dispute with
`Sawaya Aque, so Paragon may proceed against it in quasi-contract.
`
`Paragon Has Pled Fraud With Particularity
`
`
`Paragon has pleaded a powerful claim of fraud against Altaire. Paragon has expressly
`pleaded the who, what, where, and when of Altaire’s fraud known to date. As set forth in its
`pleading, on July 17, 2013, Michael Sawaya, the general counsel of Altaire, assured Paragon that
`it had the resources and production capacity to supply Paragon with phenylephrine. Dkt. No. 22
`at ¶ 95. Michael Sawaya knew at that time that his statement was false. Id. at ¶ 96. In reliance
`on Michael Sawaya’s false statement, Paragon made commitments to the Food and Drug
`Administration that it could supply phenylephrine, a medically necessary drug, so as to meet
`total market demand. Id. at ¶ 97. Michael Sawaya’s false statement has caused significant
`damage to Paragon. Id. at ¶ 99. While there is no requirement to plead the motivation of the
`“why” behind a fraud claim,3 the reason is clear. Altaire was afraid that if it had disclosed to
`Paragon that it would not be able to meet production capacity, Paragon would seek to qualify a
`second manufacturer for the product and Altaire would lose its lucrative exclusive supply
`arrangement with Paragon.
`
`
`Moreover, even though Federal Rule of Civil Procedure 9(b) provides for a heightened
`pleading standard, it does not require recitation of detailed evidence to support the fraud claim.
`See Glidepath Holding B.V v. Spherion Corp., 590 F.Supp.2d 435, 451 (S.D.N.Y. 2007) (noting
`that Fed. R. Civ. P. 9(b) “must still be read in light of the liberal pleading requirement of Rule 8,
`which only requires a ‘short and plain statement’ of the claim” and not “detailed evidence.”).
`Paragon’s fraud claim against Altaire is sufficient to withstand a motion to dismiss under Fed. R.
`Civ. P. 12(b)(6), particularly when accepting the myriad factual allegations in Paragon’s
`counterclaims as true and drawing the reasonable interferences in favor of Paragon.4
`
`
`
`
`
`3 Altaire grossly mischaracterizes the pleading standard of common law fraud. Realizing that
`Paragon has properly pled fraud under Federal Rule of Civil Procedure 9(b), Altaire in a
`desperate attempt to dismiss Paragon’s fraud claim has adopted a completely irrelevant pleading
`standard. Mills v. Polar Molecular Corp., 12 F.3d 1170 (2d Cir. 1993) (applying the legal
`standard for fraud under Securities and Exchange Commission Rule 10-b5).
`4 Bolt Elec. v. City of New York, 53 F.3d 465, 469 (2d Cir. 1995).
`
`
`
`Exhibit 1023, Page 3 of 4
`
`

`
`Case 2:15-cv-02416-LDW-AYS Document 28 Filed 09/18/15 Page 4 of 4 PageID #: 140
`
`
`
`
`
`Honorable Leonard D. Wexler
`Senior United States District Court Judge
`September 18, 2015
`Page 4
`___________________
`
`
`
`Respectfully submitted,
`
`WILSON SONSINI GOODRICH & ROSATI
`Professional Corporation
`
`
`
`
`
`
`
`
`
`Douglas H. Carsten
`Lauren E. Wardle
`12235 El Camino Real
`Suite 200
`San Diego, CA 92130
`Telephone: (858) 350-2300
`dcarsten@wsgr.com
`lwardle@wsgr.com
`
`
`
`Tonia Ouellette Klausner
`Catherine S. Grealis
`1301 Avenue of the Americas, 40th Floor
`New York, New York 10019
`Telephone: (212) 999-5800
`tklausner@wsgr.com
`cgrealis@wsgr.com
`
`Attorney for Defendant Paragon BioTeck, Inc.
`
`All Counsel (Via ECF & E-mail)
`
`
`
`
`
`Exhibit 1023, Page 4 of 4