UC Dodges Dismissal Bid in $100M Grant Spat

     SAN DIEGO (CN) — A federal judge on Monday refused to dismiss claims that a former Alzheimer’s researcher with the University of California conspired with USC to steal a $100 million research grant and other UC employees.
     U.S. District Judge Roger Benitez refused Dr. Paul Aisen and the University of Southern California’s motion to dismiss the first amended complaint by the UC regents for failing to state claims for relief.
     The UC regents, on behalf of UC San Diego, sued USC, Aisen and eight of his colleagues in July 2015. The regents claimed Aisen conspired with USC to take data, funding and his colleagues at UC San Diego to form a research facility with USC.
     The funding, from government and private sources, was more than $100 million, the regents claim.
     Last week, Benitez also refused to dismiss cross-claims filed by Aisen and USC against the University of California, finding the UC’s claim for immunity as an entity of the state of California did not hold up.
     UC San Diego has managed the Alzheimer’s Disease Cooperative Study since 1991, under an agreement with the federal National Institute on Aging. The university managed clinical data from research studies the cooperative administers, which was stored on computer servers, according to Benitez’s summary.
     The UC regents sued for 10 claims including breach of fiduciary duty and loyalty by an employee, interference with contract and prospective economic advantage, conversion, commission of computer crimes, violation of the Political Reform Act and civil conspiracy.
     Benitez noted in his order the computer servers in question add a “new complexion” to the regents’ amended complaint.
     “Now the allegations have been trimmed back to make clear that there is no claim of interference or infringement with copyright rights or privileges,” Benitez wrote.
     Aisen and USC argued that judicial estoppel bars the University of California from flip-flopping and changing its position as first laid out in the original complaint. Benitez disagreed, noting, “Rather than forcing a party to continue litigating a theory it no longer wants and preventing the abandonment of weak claims, courts ought to encourage the paring away of flawed claims. This court will not employ its discretion to preclude the University of California from discarding its earlier claimed violation of the federal Copyright Act.”
     Benitez also denied Aisen and USC’s argument that state law claims asserted by University of California are preempted by the federal Copyright Act.
     The regents claim Aisen breached his fiduciary duty to the school because he was “entrusted with wide control and authority.” Neither party cited case law involving a California faculty member, Benitez pointed out, adding that “one might find an anthology though between a faculty research director and a corporate officer.”
     Courts have found fiduciary duties were owed by corporate officers who held significant control and authority, Benitez noted, in finding the regents’ claim for fiduciary duty was sufficiently stated.
     And claims under the “anti-hacking” statute — that Aisen and USC accessed UC San Diego’s computers without the school’s permission — are enough to state a claim, according to Benitez.
     The University of California also claims it owns all data related to the Alzheimer’s research project Aisen headed and that its former employees who followed Aisen to USC took cellphones, laptops and documents belonging to UC San Diego. The conversion claim is preempted by the state’s Trade Secrets Act, Benitez found, but he did not dismiss the conversion claim as to physical property owned by the university.
     Aisen was also targeted by the regents on claims he violated two sections of the Political Reform Act, which states that a public official cannot use their position or influence a decision in which they have a financial stake or use their influence in hiring decisions. USC and Aisen contend he is not a public official.
     Despite its effort to paint itself as a “state agency,” Benitez found University of California is not a state agency and the Legislature has limited power over it. State regulations make it clear that conflict of interest laws do not apply to academic decisions of faculty members — particularly those conducting research, Benitez said.
     Benitez granted USC and Aisen’s motion to dismiss the two claims directed solely at Aisen over assertions he violated the state’s Political Reform Act.
     John Quinn, with Quinn Emanuel Urquhart & Sullivan in Los Angeles, said the claims dismissed by Benitez strike at what University of California has asserted from the start of the lawsuit.
     “By dismissing the conversion of data claim, Judge Benitez’s order makes clear that UC regents cannot assert a claim for the alleged ‘theft’ of the ADCS data, which is what UC regents have claimed this case is all about from the beginning,” Quinn said.
     Quinn called the Political Reform Act claims “baseless” and noted Aisen and USC are “confident UC regents will be unable to ultimately prove these claims.”
     The regents are represented by Daniel Sharp with Crowell & Moring in San Francisco, who did not return an email request for comment.
     Benitez is also expected to issue a written order on a separate motion to dismiss filed by the individual defendants and former employees of UC San Diego in the near future.

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