Czarnik v. Illumina, Inc., Case No. GIC 842635 (Superior Court of California, County of San Diego), was a breach of contract case before the Superior Court of California for the County of San Diego. The case was assigned to Judge Patricia A. Y. Cowett. The court overruled Illumina, Inc.’s demurrer to Dr. Anthony Czarnik’s complaint, and the case was ultimately dismissed pursuant to a settlement agreement.
Background
Dr. Anthony Czarnik was a chemist who had co-founded Illumina, Inc. (hereinafter “Illumina”), serving as its Chief Scientific Officer from 1998 to 2000.[1] He had a falling out with his co-founders, which eventually led to his termination, and he successfully sued Illumina for wrongful termination in 2001.[2]
Early Procedural History
In February 2005 Dr. Czarnik filed a complaint against Illumina and 20 unknown individuals. Dr. Czarnik alleged that in 1998 he had entered into a written employment agreement with Illumina and that one of the provisions of the contract was that his “role in founding and supporting” Illumina would be acknowledged “in future press releases and public disclosures”. Dr. Czarnik’s complaint contained two causes of action. The first was a claim for Breach of Written Employment Contract, alleging that Illumina had breached the employment agreement by failing and refusing to acknowledge his role as a founder and that he suffered damages to his reputation as a result. The second cause of action was a claim for Preliminary and Permanent Injunction; Dr. Czarnik alleged that there was no adequate remedy at law for the injuries to his reputation that he had suffered and would continue to suffer and requested that the court compel Illumina and the individual defendants to acknowledge his role as a founder of the company.
Illumina filed an answer and affirmative defenses, generally denying the allegations in Dr. Czarnik’s complaint and alleging a variety of boilerplate affirmative defenses. Pursuant to a local court rule, Illumina filed an ex parte application to schedule a hearing date for a demurrer to Dr. Czarnik’s complaint; Illumina indicated that it intended to file a demurrer under California Code of Civil Procedure § 430.10. After the ex parte hearing, the Court scheduled a hearing on Illumina’s demurrer.
Demurrer
Illumina filed its demurrer and requested that the court take judicial notice of portions of the transcript of proceedings in the initial wrongful termination lawsuit between Dr. Czarnik and Illumina. Illumina based its demurrer on Code of Civil Procedure § 430.10(e) on the ground that the complaint did “not state facts sufficient to constitute a valid cause of action.”[3] As to each cause of action, Illumina also demurred on the grounds that the cause of action was barred by the statute of limitations[4] and the doctrine of res judicata. Illumina alleged that the statute of limitations had run more than a year earlier and that res judicata barred the claims, as Dr. Czarnik was attempting to relitigate an issue that was the subject of his prior lawsuit against the company. Illumina noted that during the original trial, Dr. Czarnik testified about his belief that Illumina failed to acknowledge him as a founder in various press releases and public disclosures.
Regarding the statute of limitations, Illumina noted that under state law the statute of limitations for an action on a written contract is four years.[5] Illumina also noted that “a claim accrues upon the occurrence of the last element essential to the cause of action, even if the plaintiff is unaware of the cause of action.”[6] Illumina then discussed portions of Dr. Czarnik’s testimony at the original trial; at the trial, Dr. Czarnik testified that in January, February, and April of 2000 Illumina failed to note him as a founder on various documents—specifically slide shows to potential investors and a filing with the Securities and Exchange Commission. Illumina argued that the statute of limitations began to run when Illumina first failed to recognize Dr. Czarnik as a founder in January 2000, meaning that the complaint in February 2005 was well over a year past the expiration of the statute of limitations.
As for its res judicata argument, Illumina alleged that Dr. Czarnik was merely relitigating claims that he already raised in the initial case and that he had split what should have been a single cause of action into multiple claims. Illumina noted that under California law, “[t]he doctrine of res judicata ‘. . . precludes parties or their privies from relitigating the same cause of action that has been finally determined by a court of competent jurisdiction . . . .’”[7] Illumina argued that because the original suit resulted in a final judgment on the merits and Dr. Czarnik’s new complaint related to the misconduct for which he sued in the original case, the doctrine of res judicata barred his complaint. Illumina again referenced portions of the trial transcript to support its argument.
Dr. Czarnik filed a memorandum of points and authorities in opposition to Illumina’s demurrer. Regarding the statute of limitations argument, Dr. Czarnik argued that Illumina was estopped from raising the issue and that there were successive breaches that continued to occur during the limitations period. Dr. Czarnik claimed that the CEO and Vice President of Illumina told him that the omissions had been an oversight that would be corrected; therefore, the doctrine of estoppel barred any affirmative defense on the ground of the statute of limitations having run.[8] In support of this, Dr. Czarnik filed a declaration regarding conversations he had with Illumina’s CEO and Vice President about being omitted from documents. Dr. Czarnik also argued that despite the three referenced incidents having occurred more than four years earlier, the company continued to breach the contract—specifically, the company website at that time still did not list him as a founder. Because each failure to perform under the contract constituted a new breach, there were new causes of action that were still within the statute of limitations.
Dr. Czarnik also argued that res judicata did not apply, because the lawsuit in the case at bar was not the same cause of action as in the initial case. Dr. Czarnik noted that California courts apply the “primary rights” test to determine if a second lawsuit asserts the “same cause of action” as a prior action.[9] Because the two suits alleged different primary rights, they were claims for different causes of action, and res judicata was inapplicable. Dr. Czarnik’s original claim was a discrimination and retaliation claim; even though evidence related to Illumina’s failure to recognize him as a founder was relevant in that trial, Dr. Czarnik argued that it was indisputable that the original claim was not for breach of contract.
Illumina filed an objection and motion to strike Dr. Czarnik’s declaration, arguing that it did not comply with the state’s Code of Civil Procedure.[10] Specifically, Illumina noted that estoppel as an element of a cause of action must be specially pled,[11] which Dr. Czarnik had failed to do. As a result, Illumina requested that the court strike the declaration. Illumina also filed a reply memorandum. The company argued that the continuing contract rule Dr. Czarnik relied on was a narrow exception that did not apply, that equitable estoppel did not preclude it from raising a statute of limitations affirmative defense, and that both of Dr. Czarnik’s claims involved the same primary right.
Court’s Ruling
After oral arguments, the court overruled Illumina’s demurrer, granted the company’s request for judicial notice of the trial transcripts, and sustained the objection as to Dr. Czarnik’s declaration. Regarding the issue of res judicata, the court focused on statements made by Dr. Czarnik’s attorney at the initial trial that Illumina had referenced in its arguments; specifically, Dr. Czarnik’s attorney had indicated that the initial case was one of discrimination and retaliation. Although some proof of discrimination came from Illumina’s failure to recognize Dr. Czarnik as a founder, the court in the case at bar noted that it was “impossible to determine” that the primary rights Dr. Czarnik sought to vindicate in the initial trial was any alleged breach of contract. With respect to the statute of limitations argument, the court indicated that neither party had adequately addressed when Illumina’s obligation to recognize Dr. Czarnik as a founder would end. Illumina argued that it could not be enforceable forever, without providing any support for that argument. On the other hand, Dr. Czarnik had alleged ongoing breaches of the contract; the court held that that was sufficient to defeat demurrer on statute of limitation grounds. The court noted that it could not say whether Dr. Czarnik would ultimately prevail on his claims but that the pleadings sufficiently stated a cause of action for breach of contract.
Settlement
The parties subsequently reached a settlement, and the case was dismissed without prejudice upon request by Dr. Czarnik.
-Nathan D. Inks, Esq.
[1] Anthony W. Czarnik Ph.D.: Executive Profile & Biography, Bloomberg (Sept. 29, 2018, 1:47 PM), https://www.bloomberg.com/research/stocks/private/person.asp?personId=512799&privcapId=246830131&previousCapId=246830131&previousTitle=DeuteRx,%20LLC. See also Czarnik v. Illumina, Inc., No. D041034, 2004 WL 2757571 (Cal. Dist. Ct. App. Dec. 3, 2014).
[2] See Czarnik v. Illumina, Inc., No. D041034, 2004 WL 2757571 (Cal. Dist. Ct. App. Dec. 3, 2014).
[3] Cal. Civ. Pro. Code § 430.10 (West 2018) (“The party against whom a complaint or cross-complaint has been filed may object, by demurrer or answer as provided in Section 430.10, to the pleading on any one or more of the following grounds: . . . (e) The pleading does not state facts sufficient to constitute a cause of action.”
[4] Cal. Civ. Pro. Code § 337(1) (West 2018) (establishing four years as the statute of limitations for “[a]n action upon any contract”).
[5] Id.
[6] Brandon G v. Gray, 111 Cal. App. 4th 29, 35 (2003).
[7] Brenelli Amedeo SPA v. Bakara Furniture, Inc., 29 Cal. App. 4th 1828, 1835 (1995) (quoting Frommhagen v. Bd. of Supervisors, 197 Cal. App. 3D 1292, 1299 (1987)).
[8] Carruth v. Fritch, 36 Cal. 2d 426, 433 (1950) (“One cannot justly or equitably lull his adversary into a false sense of security, and thereby cause his adversary to subject his claim to the bar of the statute of limitations, and then be permitted to plead the very delay caused by his course of conduct as a defense to the action when brought.”).
[9] Crowley v. Katleman, 8 Cal. 4th 666, 681–82 (1994) (“The primary right theory is a theory of code pleading that has long been followed in California. It provides that a ‘cause of action’ is comprised of a ‘primary right’ of the plaintiff, a corresponding ‘primary duty’ of the defendant, and a wrongful act by the defendant constituting a breach of that duty. The most salient characteristic of a primary right is that it is indivisible: the violation of a single primary right gives rise to but a single cause of action. A pleading that states the violation of one primary right in two causes of action contravenes the rule against ‘splitting’ a cause of action. As far as its content is concerned, the primary right is simply the plaintiff’s right to be free from the particular injury suffered.” (citations omitted)).
[10] Cal. Civ. Pro. Code § 436 (West 2018).
[11] Rivera v. City of Carson, 117 Cal. App. 3D 718, 727 (1981).