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Lindenberg v. Arrayit Corporation

United States District Court, D. New Jersey

August 6, 2014

ARRAYIT CORPORATION, et al., Defendants.


STANLEY R. CHESLER, District Judge.

This matter comes before the Court upon the motion filed by Defendant Arrayit Corporation ("Arrayit Corporation") pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss all claims asserted against it in the First Amended Complaint. Plaintiff, Tamarin Lindenberg ("Plaintiff" or "Lindenberg") has opposed the motion. Also before the Court is the motion to dismiss filed by Defendant/Third-Party Defendant John Howell ("Howell"), pursuant to Federal Rule of Civil Procedure 12(b)(2), on the grounds that this Court lacks in personam jurisdiction over him. Howell's motion has been opposed by Plaintiff and by Defendant/Third-Party Plaintiff Avant Diagnostics (formerly known as Arrayit Diagnostics). The Court has considered the papers filed by the parties. For the reasons that follow, Arrayit Corporation's motion to dismiss and Howell's motion to dismiss will both be granted.


This lawsuit arises out of the termination of Plaintiff's employment.

In February 2012, Plaintiff Lindenberg, then a resident of Tennessee, entered into a three-year employment agreement with Arrayit Diagnostics, a medical technology company incorporated in Nevada.[1] It currently maintains its principal place of business in Scottsdale, Arizona, although the motion papers indicate that it was previously headquartered in Oregon. At the time Plaintiff was hired, Defendant John Howell, served as the CEO of Arrayit Diagnostics. He is a resident of the State of Oregon and has been at all relevant times. Plaintiff alleges that Howell asked Plaintiff, a cancer survivor, to join Arrayit Diagnostics as an executive and consultant for the purpose of using her personal story to promote an early detection test for ovarian cancer, known as OvaDx, to investors. Lindenberg further alleges that, in connection with her employment, she moved to New Jersey at Howell's request and resided with her family in a house leased by Arrayit Diagnostics.

The First Amended Complaint avers that in May 2012, a decision was made by Howell, Lindenberg and others that a separate private company would be formed for the purpose of raising capital and commercializing the OvaDx test. This company would be known as Yarra. According to Plaintiff, it was agreed that Arrayit Diagnostics would transfer to Yarra its licensing rights to the OvaDx test in exchange for an ownership interest in Yarra. It was further agreed that Lindenberg would be Yarra's CEO but would also remain an employee of Arrayit Diagnostics until the transfer was finally executed. Plaintiff asserts that Howell met with her and other individuals in New Jersey to discuss the formation of Yarra and the transfer of OvaDx. Howell acknowledges that he traveled to New Jersey for a meeting in May 2012 but maintains that it pertained to the business of Arrayit Diagnostics. He further asserts that the location was chosen as mutually convenient for the participants, who were all out-of-state residents, and that his visit to New Jersey on that occasion lasted 48 hours.

A June 2012 agreement, signed by Howell for Arrayit Diagnostics and Lindenberg for Yarra, memorializes the plan to transfer OvaDx to Yarra. The plan did not, however, come to fruition. Lindenberg avers that in or around November 2012, she questioned Howell about a filing made by Arrayit Diagnostics with the Securities and Exchange Commission ("SEC") containing information she claims misrepresented the facts relating to the agreement between Arrayit Diagnostics and Yarra. Howell resigned from Arrayit Diagnostics in that same month. He was succeeded by Defendant Steven Scott. Lindenberg alleges that she again raised the issue of the allegedly false SEC filing in meetings held December 17 and 18, 2012. On December 19, 2012, Arrayit Diagnostics terminated Lindenberg's employment. In a January 8, 2013 letter signed by Scott on behalf of Arrayit Diagnostics, Lindenberg was informed that her termination was based on violations of the employment agreement, including her activity in connection with Yarra, citing the employment agreement's non-compete provision.

Lindenberg initiated this action in the Superior Court of New Jersey, Essex County, on or about October 1, 2013. She named various defendants, including movant Arrayit Corporation, which is identified as the corporate parent of Arrayit Diagnostics.[2] The action was removed to this Court by Defendant Arrayit Corporation on grounds of diversity jurisdiction pursuant to 28 U.S.C. ยง 1332(a). The First Amended Complaint asserts the following state law claims against all Defendants: retaliatory termination in violation of the Conscientious Employee Protection Act ("CEPA"); breach of contract; breach of the implied covenant of good faith and fair dealing; economic duress; and intentional infliction of emotional distress. It also asserts a claim against Arrayit Corporation for tortious interference with her employment agreement.


Arrayit Corporation moves for dismissal of the entire First Amended Complaint pursuant to Rule 12(b)(6) for failure to state a claim upon which relief may be granted. A complaint will survive a motion under Rule 12(b)(6) only if it states "sufficient factual allegations, accepted as true, to state a claim for relief that is plausible on its face.'" Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (quoting Bell Atlantic v. Twombly , 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id . (citing Twombly , 550 U.S. at 556.) Following Iqbal and Twombly, the Third Circuit has held that, to prevent dismissal of a claim, the complaint must show, through the facts alleged, that the plaintiff is entitled to relief. Fowler v. UPMC Shadyside , 578 F.3d 203, 211 (3d Cir. 2009). While the Court must accept all factual allegations as true and construe the complaint in the light most favorable to the plaintiff, it need not accept a "legal conclusion couched as a factual allegation." Baraka v. McGreevey , 481 F.3d 187, 195 (3d Cir. 2007); Fowler , 578 F.3d at 210-11; see also Iqbal , 556 U.S. at 679 ("While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations."). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, will not suffice." Iqbal , 556 U.S. at 678.

The Court will apply this standard as it analyzes, in turn, the six claims asserted against Arrayit Corporation.

A. CEPA Claim

CEPA, N.J.S.A. 34:19-1, et seq., prohibits employers from taking retaliatory actions against employees "who blow the whistle' on organizations engaged in illegal or harmful activity." Young v. Schering Corp. , 141 N.J. 16, 23 (1995). It provides a cause of action to an aggrieved employee or former employee against the employer. See N.J.S.A. 34:19-5. The statute defines an employee as "any individual who performs services for and under the control and direction of an employer for wages or other remuneration." N.J.S.A. 34:19-2b. An employer is also expressly defined by CEPA as "any individual, partnership, association, corporation or any person or group of persons acting directly or indirectly on behalf of or in the interest of an employer with the employer's consent...." N.J.S.A. 34:19-2a.

Arrayit Corporation argues that Lindenberg cannot state a plausible CEPA against it for the simple reason that the First Amended Complaint does not, and cannot allege that Arrayit Corporation was Lindenberg's employer. Arrayit Corporation is correct that the First Amended Complaint lacks factual allegations that plausibly support the label of employer, within the meaning of CEPA. Lindenberg alleges that she was hired by Howell, then CEO of Arrayit Diagnostics. It further alleges that pursuant to an agreement she entered into with Arrayit Diagnostics, Lindenberg served as a consultant for that company. The First Amended Complaint does not allege any facts demonstrating that Lindenberg performed services for Arrayit Corporation, that Arrayit Corporation directed and controlled the performance of her duties as a consultant and/or executive or that Arrayit Corporation paid Lindenberg wages or other remuneration for her services. Her allegation, in paragraph 8 of the First Amended Complaint, that Arrayit Corporation was her employer, as defined by CEPA, is a purely conclusory recital of an essential element of a CEPA claim and thus insufficient to state a plausible a claim. Iqbal , 556 U.S. at 678. Moreover, while an individual or entity, though not strictly a plaintiff's employer, may be exposed to CEPA liability based on its involvement in the decision to subject the plaintiff to a retaliatory employment action, see Michel v. Mainland Regional Sch. Dist., 2009 WL 2391293, at *2 (D.N.J. July 30, 2009), Lindenberg's allegations that Arrayit Corporation caused Arrayit Diagnostics to terminate her employment are also conclusory. The First Amended Complaint avers that Arrayit Corporation knew of Lindenberg's three-year employment contract with Arrayit ...

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