Judge: Loren G. Freestone, Case: 37-2019-00064665-CU-BT-CTL, Date: 2023-11-17 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - November 16, 2023

11/17/2023  10:30:00 AM  C-64 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Loren G. Freestone

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Civil - Unlimited  Business Tort Motion Hearing (Civil) 37-2019-00064665-CU-BT-CTL NEURELIS INC VS. AQUESTIVE THERAPEUTICS INC [IMAGED] CAUSAL DOCUMENT/DATE FILED:

TENTATIVE RULING Plaintiff Neurelis Inc.'s motion for leave to file a third amended complaint against Defendant Aquestive Therapeutics Inc. is GRANTED.

Preliminary Matters Neurelis cited an unpublished opinion in a footnote to its motion. Aquestive cited four unpublished opinions throughout its opposition. Those citations are disregarded, and both parties are reminded to not cite unpublished opinions in future briefing. (Cal. Rules of Court, rule 8.1115(a).) Aquestive requests judicial notice of documents from the food effect study (Exs. A, C, and D), an email sent by its employee (Ex. B), and deposition excerpts of its employees and its paid consultant (Exs. E, F, and G). Neurelis opposes the request on numerous grounds. The request for judicial notice is denied.

(See Johnson v. Honeywell International Inc. (2009) 179 Cal.App.4th 549, 560 [denying request for judicial notice of a declaration by a chemist and a Pew Research Center study because a motion involving the pleadings 'may not be turned into a contested evidentiary hearing through the guise of having the court take judicial notice of affidavits, declarations, depositions, and other such material which was filed on behalf of the adverse party and which purports to contradict the allegations and contentions of the plaintiff'].) Sealing Issues In support of its motion, Neurelis filed a supporting declaration by its attorney (Nicole Valco) that redacts portions of the attached Exhibit 3 (a meet and confer email exchange regarding the proposed TAC). An unredacted copy was also lodged conditionally under seal. It is unclear whether Neurelis intended for the unredacted copy to be filed under seal pursuant to the parties' protective order. If so, the material was not properly labeled (see below). In any event, the substance of the redacted portions of the meet and confer email is not material to the disposition of this motion. (See Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2022) ¶ 9:416.1.) As such, the unredacted copy of the Valco Declaration will be returned to Neurelis.

In support of its reply, Neurelis also filed a supporting declaration by Attorney Valco that redacts/omits the attached Exhibits 4–6 (deposition transcripts). The reply itself redacts references to these exhibits.

Unredacted copies were lodged conditionally under seal. Neurelis relies on this testimony to argue the Calendar No.: Event ID:  TENTATIVE RULINGS

2997686  56 CASE NUMBER: CASE TITLE:  NEURELIS INC VS. AQUESTIVE THERAPEUTICS INC [IMAGED]  37-2019-00064665-CU-BT-CTL merits of its proposed amendment. The testimony is therefore effectively being submitted as a basis for adjudication such that Neurelis was required to comply with California Rules of Court 2.550–2.551 and file a motion to seal if it wanted the testimony considered. (See Mercury Interactive Corp. v. Klein (2007) 158 Cal.App.4th 60, 104 & fn. 34.) No such motion was filed. Moreover, as set forth below, the merits of the amendment are not currently at issue. As such, the unredacted copy of the Valco Reply Declaration and unredacted copy of the reply will also be returned to Neurelis.

Finally, regarding the repeated use of filing/lodging matters under seal: The parties are reminded that the Stipulated Protective Order requires compliance with Rules of Court 2.550 and 2.551 when they apply. (ROA #196, ¶ 18.) This includes placing a statement on the cover of the unredacted version that it 'MAY NOT BE EXAMINED WITHOUT COURT ORDER-CONTAINS MATERIAL FROM CONDITIONALLY SEALED RECORD,' placing the unredacted material in an envelope labeled 'CONDITIONALLY UNDER SEAL,' and lodging it with the department pending a ruling on the motion to seal. (See Cal. Rules of Court, rule 2.551, (b)(4)–(5), (d).) Per Department 64's policies and procedures, the court will not decide the underlying motion until the motion to seal is decided. For discovery motions and other proceedings not governed by rule 2.550 and 2.551, there is no need to lodge the material conditionally under seal, as there is no need to await a ruling on a motion to seal.

The party should simply provide the unredacted material to the department for filing under seal. Per the Stipulated Protective Order, the material must be labeled 'CONFIDENTIAL – FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER.' (ROA #196, ¶ 18.) If the court determines that rules 2.550 and 2.551 apply, the party submitting the material will be contacted by the calendar clerk to schedule a motion to seal before the material is filed, which may require the underlying motion be continued so that the motion to seal may be heard first. Finally, as noted above, in some cases it is not necessary to file documents under seal because the court 'does not need to review the confidential material in order to decide the underlying motion. In such cases, simply file the redacted documents in the public file and explain the redaction in, e.g., the accompanying memorandum of points and authorities.' (Weil & Brown, supra, at ¶ 9:416.1.) Analysis 'The trial court has discretion to allow amendments to the pleadings 'in the furtherance of justice.' This discretion should be exercised liberally in favor of amendments, for judicial policy favors resolution of all disputed matters in the same lawsuit.' (Kittredge Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1047.) It is 'irrelevant that new legal theories are introduced as long as the proposed amendments relate to the same general set of facts.' (Id. at p. 1048.) Even when there has been unreasonable delay, 'it is an abuse of discretion to deny leave to amend where the opposing party was not misled or prejudiced by the amendment.' (Ibid.; accord Jo Redland Trust, U.A.D. 4-6-05 v. CIT Bank, N.A. (2023) 92 Cal.App.5th 142, 168.) Here, the proposed amendments relate to the same general set of facts. The existing allegations and the new allegations both concern Aquestive's (1) allegedly false and misleading statements about Neurelis' drug Valtoco, and (2) allegedly unfair efforts to promote its competing drug Libervant.

Neurelis has been reasonably diligent in seeking leave to amend. Aquestive produced the Informed Consent Form that contains the two additional instructions in October 2022. Neurelis thereafter endeavored to downgrade the 'highly confidential' designation Aquestive ascribed to the material.

Neurelis then noticed depositions of witnesses with knowledge of the food study, which did not occur until April 2023. Neurelis also subpoenaed the company that performed the study (Novum), which produced documents in May 2023. Neurelis then asked Aquestive to stipulate to the TAC in June 2023, and it filed this motion in July 2023.

Aquestive has not demonstrated prejudice. Although this case was filed in December 2019, it was stayed for approximately two years due to Aquestive's anti-SLAPP motion and the ensuing cross-appeals. A trial date has still not been set, and Aquestive acknowledges that the parties have already been actively engaging in discovery on 'numerous topics, including the food effect study.' The Calendar No.: Event ID:  TENTATIVE RULINGS

2997686  56 CASE NUMBER: CASE TITLE:  NEURELIS INC VS. AQUESTIVE THERAPEUTICS INC [IMAGED]  37-2019-00064665-CU-BT-CTL only purported prejudice that Aquestive identifies is the need to disprove the additional allegations, which is not the type of prejudice that supports denial of the motion. (See Landis v. Superior Court (1965) 232 Cal.App.2d 548, 557 [holding it is 'unreasonable to deny a party the right to amend where the only apparent hardship to the defendants is that they will have to defend'].) Aquestive has also not demonstrated futility. Aquestive essentially argues that even though the Informed Consent Form provided to study participants referenced two additional instructions that are not part of the FDA-approved instructions for use for Valtoco, those additional instructions were omitted from the Study Protocol and not actually followed when the study was conducted. Aquestive does not challenge the sufficiency of the allegations in the TAC, but rather seeks to challenge the merits of the new claims based on evidence (contained in its request for judicial notice, which was denied). This type of challenge is best left for another day. (See Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 760, citing Kittredge, supra, 213 Cal.App.3d at p. 1048 [when a party opposes leave to amend based on the merits of the proposed amendment, the 'better course of action' is to permit the amendment 'and then let the parties test its legal sufficiency in other appropriate proceedings'].) Conclusion The interests of justice weigh in favor of permitting the amendment. As such, the motion is granted.

Neurelis shall file its third amended complaint within 5 days.

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