United States District Court, D. Massachusetts
MEMORANDUM AND ORDER
ALLISON D. BURROUGHS U.S. DISTRICT JUDGE.
March 30, 2015, Plaintiffs JLI Invest S.A.
(“JLI”) and LIN Invest S.A. (“LIN”)
(together, “Plaintiffs”) filed a complaint
against Computershare; Indenix Pharmaceuticals, Inc.
(“Idenix”), Merck & Co., Inc. and Imperial
Blue Corporation (together, “Merck”)
(collectively, “Defendants”). Currently pending
before the Court are (1) Idenix and Merck's and (2)
Computershare's Motions to Dismiss Plaintiffs' claims
on the statute of limitations grounds [ECF Nos. 66,
For the reasons stated below, Defendants' motions to
dismiss [ECF Nos. 66, 70] are GRANTED IN PART AND DENIED
IN PART only with respect to the statute of limitations
purposes of the instant Memorandum and Order, only the
background relevant to the statute of limitations issues is
included. In deciding a motion to dismiss, the Court treats
all well-pleaded facts in the operative complaint as true and
makes all reasonable inferences in favor of the plaintiff.
United States ex rel. Hutcheson v. Blackstone Med.,
Inc., 647 F.3d 377, 383 (1st Cir. 2011). The following
facts are taken from Plaintiffs' First Amended Complaint
[ECF No. 10 (“Compl.”)].
is a biopharmaceutical company engaged in the discovery and
development of drugs for treatment of human viral diseases.
Based on the Amended Complaint, Idenix is incorporated in
Delaware with its principal place of business in
Massachusetts. Merck is a pharmaceutical company incorporated
in New Jersey with its principal place of business in New
Jersey. In 2014, Merck acquired Idenix. Imperial Blue is a
wholly owned subsidiary of Merck. Computershare Investor
Services, LLC is a Delaware limited liability company, and
Computershare Inc. is a Delaware corporation. Computershare
Trust Company is a trust company formed under United States
law and is a citizen of Massachusetts. It acted as
Idenix's transfer agent during the relevant time periods.
The Computershare defendants each have their principal place
of business in Massachusetts.
allege on information and belief that Equiserve acted as
Idenix's transfer agent until 2005, at which point
Equiserve was acquired by Computershare. After the 2005
acquisition, Computershare acted as Idenix's transfer
agent, which included escheat services for Idenix's
abandoned or unclaimed securities. The escheat services
included finding lost shareholders, communicating with
shareholders to prevent escheatment, and determining whether
Idenix shares constituted unclaimed property. Plaintiffs were
intended third-party beneficiaries of Computershare's
contract with Idenix for these escheat services.
JLI and LIN are Belgian entities formed by Dr. Gilles
Gosselin and Dr. Jean Louis Imbach to hold their shares in
Idenix. In 1997, Imbach and Gosselin were part of a research
team that synthesized a new drug found to be active against
Hepatitis B. Idenix was established in 1998 to help develop
the drug. JLI owned 240, 000 shares of Idenix and LIN owned
320, 000 shares of Idenix. The Amended Complaint alleges that
Idenix was aware of the relationship between Gosselin,
Imbach, JLI, and LIN.
Delaware's state escheat statute, holders of unclaimed or
abandoned property subject to Delaware's jurisdiction are
required to report and remit such property to the State of
Delaware. See Del. Code tit. 12, §§ 1199,
1201. In November 2008, Computershare, acting as agent of
Idenix, reported to the state of Delaware that the 560, 000
shares of Idenix owned by Plaintiffs has been abandoned and
constituted unclaimed property. On January 2, 2009, JLI's
and LIN's shares in Idenix were escheated to the state of
Delaware. The Amended Complaint alleges that “the
escheat of such shares was not required or permitted.”
Compl. ¶ 37.
2009, Plaintiffs allege that Computershare and Idenix had
Plaintiffs' proper mailing addresses and actually sent
correspondence to Plaintiffs regarding their shares, which
was never returned as undeliverable. Furthermore, Gosselin,
on behalf of LIN, worked with Idenix at least through 2011
and had regular contact with it as part of this relationship.
Imbach, on behalf of JLI, worked with Idenix at least through
2006 and had regular contact with it as part of this
relationship. Specifically, the Amended Complaint notes that
LIN entered into a consulting agreement with Idenix that
explicitly acknowledged LIN's shares in Idenix, was
executed on January 1, 2007, and was terminated in March
2011. Similarly, JLI entered into a consulting agreement with
Idenix that explicitly acknowledged JLI's shares in
Idenix, was executed on January 1, 2003, and was terminated
on December 31, 2006. Idenix made regular payments to both
JLI and LIN under these agreements that they received and
cashed. Furthermore, Plaintiffs received periodic account
statements related to their shares that specifically noted
“[n]o action on your part is required.” Compl.
¶ 53. Plaintiffs state that they were
nonetheless never contacted about the possible escheatment of
their shares, and that Defendants failed to undertake the
required due diligence prior to escheatment. In short,
Plaintiffs were completely blind-sided by the escheatment.
between March 23, 2009 and April 6, 2009, the state of
Delaware liquidated Plaintiffs' shares for a total of $1,
695, 851.75. During that time, according to Plaintiffs, the
market for Idenix stock was fairly illiquid and comprised of
approximately 50 shareholders. Accordingly, they argue that
the sale in 2009 did not represent the true value of their
not until March 30, 2011, upon their own inquiry, that
Plaintiffs were informed that their shares had been
escheated. At the time, however, Computershare informed them
that the shares has been escheated to the state of
Massachusetts. On July 9, 2012, Computershare informed
Plaintiffs that their shares had actually been escheated to
Delaware. In September 2012, Plaintiffs began to pursue a
claim with the Delaware Office of Unclaimed Property to
recover their shares. Plaintiffs argue, however, that because
of Computershare's and Idenix's “lack of
responsiveness and assistance, ” they were not able to
confirm that their shares had actually been escheated to
Delaware until May 2014, and only learned of the liquidation
in October 2014. Compl. ¶ 62. In 2014, Merck acquired
Idenix at $24.50 per share. Plaintiffs aver that they would
have participated in the tender offer had their shares not
been escheated. Under the Merck tender offer, Plaintiffs'
total shares would have been worth over $12 million. On June
8, 2015, Plaintiffs received a check from Delaware in the
amount of $1, 695, 851.75, equal to the amount their shares
were sold for.
Procedural Background Relevant to Statute of Limitations
initiated this lawsuit on March 30, 2015. They filed an
Amended Complaint on July 23, 2015. [ECF No. 10]. The Amended
Complaint alleges the following causes of action: negligence
(Count I); Massachusetts Chapter 93A violation (II);
conversion (III); breach of contract (IV); breach of covenant
of good faith and fair dealing (V); breach of fiduciary duty
(VI); violations of Massachusetts and Delaware state
securities law (VIII); § 1983 violation (IX); and
negligent misrepresentation (X). Throughout, for ease of
reference, Counts I, III, VI, VIII and X will be collectively
referred to as the “tort-based claims” and Counts
IV and V as the “contract-based claims.”
asserts a negligence claim against all Defendants, on the
grounds that Computershare and Idenix breached their duties
of care to Plaintiff shareholders by, inter alia:
(1) wrongfully escheating Plaintiffs' shares; (2) failing
to conduct due diligence prior to the escheat, in violation
of state and federal law, including 17 C.F.R. §
240.17Ad-17; (3) failing to contact Plaintiffs before
escheating their shares, even though Defendants knew how to
contact Plaintiffs; (4) in Computershare's case, failing
to inquire with Idenix regarding Plaintiffs' contact
information and their relationship with Idenix, and in
Idenix's case, failing to inform Computershare of such
contact information and relationships; (5) failing to provide
sufficient information to the State of Delaware to enable
Delaware to return Plaintiffs' shares to them; (6)
failing to notify Plaintiffs that their shares would be or
had been escheated; (7) misrepresenting to Plaintiffs that
their shares had been escheated to Massachusetts, which
caused a lengthy delay in Plaintiffs' efforts to recover
their shares; and (8) failing to disclose to Plaintiffs in
any written document that their shares could be subject to
escheat under certain circumstances, that the relevant state
law on such issues had changed, or that the changes to the
law would result in the automatic escheat of Plaintiffs'
shares unless immediate action was taken. Plaintiffs further
contend that Merck, as successor in interest to Idenix, is
liable for Idenix's negligent acts and omissions.
Plaintiffs allege that as a result of the Defendants'
negligence, Plaintiffs lost over $12 million.
II alleges that Defendants violated Massachusetts General
Laws Chapter 93A, § 2 by willingly, knowingly, and
recklessly engaging in unfair and/or deceptive acts or
practices. The factual allegations supporting the Chapter 93A
claim in Count II are similar to those alleged in Count I.
III alleges that all Defendants are liable for conversion. In
Count IV, Plaintiffs assert a claim for breach of contract,
on the grounds that they were the third-party beneficiaries
of the contract between Computershare and Idenix, including
any indemnity provisions therein. Plaintiffs contend that
both parties breached their respective obligations under the
contract, and that Plaintiffs were damaged as a result.
Similarly, Count V alleges that the Defendants breached the
implied covenant of good faith and fair dealing associated
with that contract, in an effort to deprive Plaintiffs of the
benefit of the contract.
VI alleges that Idenix and Merck breached their fiduciary
duties to the Plaintiffs, to safeguard and protect their
shares, to maintain accurate books and records, to avoid
making untrue statements of material fact or material
omissions, and to refrain from engaging in any practice or
course of business that would operate as a deceit. Plaintiffs
contend that Idenix knew or should have known that Plaintiffs
had not, in fact, abandoned their shares, based on its
regular contacts with the Plaintiffs. They also contend that
Idenix and its officers failed to inform Plaintiffs of
material, non-public information, namely that the company was
on the brink of an acquisition, and unfairly profited from
the sale and liquidation of Plaintiffs' shares prior to
the Merck tender offer.
Count VIII, Plaintiffs allege that the Defendants violated
their statutory duties under Massachusetts and Delaware state
securities laws, to ensure that securities were not wrongly
transferred from one person to another. See Mass.
Gen. Laws ch. 106, §§ 8-404, 8-405; Del. Code tit.
6, §§ 8-404, 8-405.
IX alleges that all Defendants violated 42 U.S.C. §
1983, insofar as Computershare and Idenix “had a
symbiotic and intertwined relationship with Delaware, ”
such that Delaware, Computershare, and Idenix “jointly
participated in the escheat” of Plaintiffs' shares.
See Compl. ¶¶ 144-59. Accordingly,
Plaintiffs contend that Defendants' wrongful acts were
taken under “color of state law, ” subjecting
them to liability under 42 U.S.C. § 1983.
Count X alleges that Defendants are liable for negligent
misrepresentation, based on Computershare's erroneous
statement that Plaintiffs' shares had been escheated to
Massachusetts. Plaintiffs also allege that Computershare
negligently and recklessly concealed material facts which
they were under a legal duty to communicate. Plaintiffs
contend that they relied on these ...