Direct Biologics Lawsuits: Trade Secrets, Contracts, SPAC Merger

Direct Biologics, the Austin-based biotechnology company behind the investigational ExoFlo therapy, has been a party to several lawsuits since 2018. The disputes include a trade secret and non-compete fight against a former executive that produced a published Fifth Circuit opinion, a contract case against a former chief medical officer, a breach-of-contract claim brought by a clinical trial partner, earlier contract litigation in Missouri, and a bankruptcy proceeding in which a debtor’s membership interest in the company was at stake.

Trade Secret and Non-Compete Case Against Adam McQueen and Vivex Biologics

The company’s most consequential litigation is Direct Biologics, L.L.C. v. McQueen, filed in the Western District of Texas in May 2022. Adam McQueen had joined Direct Biologics in 2018 as its third employee, rose to executive vice president, and worked on the AmnioWrap and ExoFlo product lines with access to production specifications and formulas the company treated as closely guarded. He resigned on March 28, 2022, was terminated for cause the following day, and took a position as vice president of product strategy at Vivex Biologics, a competitor developing extracellular vesicle products.¹

Direct Biologics alleged breach of non-compete, non-solicitation, and confidentiality covenants, plus trade secret misappropriation under the federal Defend Trade Secrets Act and the Texas Uniform Trade Secrets Act. It also accused McQueen of linking a personal Dropbox account to corporate systems and downloading sensitive documents before leaving. McQueen denied misusing anything and said he had used personal Dropbox because the company had not provided a file-sharing platform; a Vivex research and development executive testified McQueen was kept away from areas of competitive overlap.¹

The district court granted a temporary restraining order but denied a preliminary injunction on May 24, 2022, finding no substantial threat of irreparable harm. It then sent the remaining claims to arbitration under McQueen’s employment agreement and dismissed the case with a final judgment.²

On April 3, 2023, the Fifth Circuit vacated both rulings. The panel held that the district court had asked the wrong question on irreparable harm, looking only at whether McQueen had already used or disclosed trade secrets and ignoring whether he was likely to do so while the case proceeded. Both trade secret statutes reach threatened misappropriation, and a threat can exist when a competitor places a high-level executive in a role where disclosure is likely, even without direct proof of intent. The court also faulted the lower court for concluding damages could substitute for an injunction without analyzing how difficult those damages would be to calculate, noting that losses from a missed opportunity to create or control a new market are especially hard to quantify.¹

On the dismissal, the panel held that because the employment agreement preserved the right to seek preliminary injunctive relief in court even while arbitration was mandatory for the merits, the trial court should have stayed the case under the Federal Arbitration Act rather than entered a final judgment. A dismissal stripped the court of jurisdiction to enforce any injunction it later issued.¹

The opinion is reported at 63 F.4th 1015 and binds federal courts in the Fifth Circuit on both federal and Texas trade secret claims.³ The available record does not show how the case was ultimately resolved on remand or in arbitration.

Contract Suit Against Former Chief Medical Officer Amy Lightner

In January 2024, Direct Biologics sued Amy Lightner, M.D., its former chief medical officer, in the 200th District Court in Travis County, Texas. Court records categorize the case as a commercial and trade contract dispute but do not detail the company’s specific claims.⁴⁵

Lightner answered with a general denial and filed counterclaims. The litigation moved through summary judgment motions on those counterclaims and through discovery disputes, including a motion to quash and for a protective order. On May 11, 2026, the court docketed an agreed notice of nonsuit with prejudice as to Direct Biologics’ claims, ending the company’s affirmative case. The docket was still listed as open in early June 2026.⁵

Breach-of-Contract Suit by Phillip Fleshner, M.D.

On August 14, 2024, Phillip Fleshner M.D. Inc. sued Direct Biologics in the Miami-Dade County Circuit Court in Florida for breach of contract. The complaint alleges Direct Biologics breached multiple agreements tied to clinical trial services for Crohn’s disease and ulcerative colitis treatments. Seth J. Donahoe of Tripp Scott, P.A. represents the plaintiff, and Judge Charles K. Johnson is assigned to the case.⁶

The suit arrived shortly before Direct Biologics terminated several gastrointestinal trials in early 2025, citing enrollment challenges.⁷ The available record does not identify the specific contractual terms in dispute or provide status beyond the initial filing and issuance of summons.

Earlier Missouri Contract Cases: Kimera Labs and Douglas Spiel

Direct Biologics filed Direct Biologics v. Kimera Labs, Inc. in 2018 in the Eastern District of Missouri (Case No. 4:18-cv-02039), naming Kimera Labs, Marc Waldman, and Douglas Spiel as defendants. The case had been removed to federal court and involved contract claims along with a request for injunctive or declaratory relief.⁸

A related case, Direct Biologics, LLC v. Spiel (Case No. 4:19-cv-01024), was filed in the same court in 2019 and terminated on May 9, 2019, though docket activity continued as late as November 2022. Public records do not indicate whether either case ended by settlement, judgment, or dismissal.⁹

The Pettine Bankruptcy and a Direct Biologics Membership Interest

Direct Biologics was not itself a litigant in this proceeding, but the company’s name appears in a bankruptcy case that produced a notable ruling on LLC interests. Dr. Kenneth A. Pettine filed for Chapter 7 in April 2019. His assets included a 2.55% membership interest in Direct Biologics, a Wyoming LLC whose operating agreement contained transfer restrictions that blocked the trustee from selling the interest to a third party.¹⁰

Trustee Joli Lofstedt sought a charging order under Wyoming law to redirect any distributions from the membership interest to the bankruptcy estate. The bankruptcy court granted the order, valued at $681,907.18 less amounts already collected, and authorized its sale to a creditor’s affiliate for $5,000, subject to auction. Pettine argued that a separate charging order was unnecessary given the trustee’s automatic lien and that the order would create a post-petition lien surviving bankruptcy, denying him a fresh start.¹¹

In November 2023, the Tenth Circuit Bankruptcy Appellate Panel ruled against Pettine on the merits, holding that a trustee may use the strong-arm powers of Section 544(a)(1) of the Bankruptcy Code to obtain a charging order against a debtor’s LLC interest under state law. The panel reversed on a procedural point, finding Pettine had standing because his financial interests were directly affected. The decision confirmed that an LLC membership interest belongs to the bankruptcy estate and can be reached through state law remedies even when the operating agreement blocks a direct transfer.¹⁰

The Terminated SPAC Merger

Direct Biologics’ 2022 merger agreement with Good Works II Acquisition Corp. did not produce litigation. The parties mutually terminated the deal on February 17, 2023, with customary mutual releases and covenants not to sue after roughly 89% of Good Works II shares were redeemed at an extension meeting, leaving only about $24.85 million in trust against the $200 million raised in the SPAC’s 2021 IPO.¹² The transaction had valued Direct Biologics at roughly $675 million to $723 million and would have listed the combined company on Nasdaq.¹³ Good Works II never completed a business combination and was delisted in March 2023.¹⁴ Direct Biologics remains privately held.¹⁵

1
U.S. Court of Appeals for the Fifth Circuit. Direct Biologics, L.L.C. v. McQueen, No. 22-50442
2
Wolters Kluwer. Direct Biologics, LLC v. McQueen, No. 1:22-CV-381-SH
3
Bloomberg Law. Direct Biologics Gets New Look in Noncompete, Trade Secrets Case
4
Direct Biologics. Article One
5
UniCourt. Direct Biologics, LLC vs. Amy Lightner, MD
6
Trellis Law. Phillip Fleshner M.D. Inc vs. Direct Biologics, LLC
7
Larvol Delta. ExoFlo Product Page
8
GovInfo. Direct Biologics LLC v. Kimera Labs, Inc., No. 4:18-cv-02039
9
CourtListener. Direct Biologics, LLC v. Spiel, No. 4:19-cv-01024
10
U.S. Bankruptcy Appellate Panel for the Tenth Circuit. Pettine v. Direct Biologics, BAP No. 23-013
11
Forbes. Bankruptcy Law and Charging Order Law Collide Again in Pettine
12
SPAC Insider. Good Works II Terminates Direct Biologics Deal
13
U.S. Securities and Exchange Commission. Good Works II Acquisition Corp. Press Release
14
Nasdaq Trader. Equity Corporate Actions Alert #2023-161
15
Direct Biologics. Company