Fibrogen, Inc. v. Cellex-C International, Inc.

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT February 10, 2005
_______________________
Charles R. Fulbruge III
No. 04-10417 Clerk
_______________________
FIBROGEN, INC.; SKIN SCIENCES, INC,
Plaintiffs - Appellees,
v.
CELLEX-C INTERNATIONAL, INC.; ET AL.,
Defendants,
CELLEX-C INTERNATIONAL, INC.; CELLEX-C COSMACEUTICALS, INC;
ANTI-AGING INTERNATIONAL, INC.,
Defendants - Appellants.
_______________________
Appeal from the United States District Court
for the Northern District of Texas
(00-CV-778)
_______________________
Before GARWOOD, JONES and PRADO, Circuit Judges.
PER CURIAM:*
In this breach of contract case, Appellants contend that the
district court erred in granting summary judgment against them.
Appellants claim that this ruling was error because they
presented evidence—although not argument—that they were
fraudulently induced to enter into the contract at issue.
*
Pursuant to 5TH CIRCUIT RULE 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIRCUIT
RULE 47.5.4.
1
Because we conclude that the district court did not plainly err
in granting summary judgment, we affirm.
This case arises from a settlement agreement resolving five
lawsuits between the parties, Appellants Cellex-C International,
Inc.; Cellex-C Cosmaceuticals, Inc.; and Anti-Aging
International, Inc. (collectively “Cellex C”) and Appellees
FibroGen, Inc. and Skin Sciences, Inc. (collectively
“FibroGen”).1 As part of the settlement, Cellex-C signed a
promissory note for $500,000. After making several payments,
Cellex-C stopped paying FibroGen under the agreement and note.
In response, FibroGen filed this lawsuit for, among other things,
breach of the settlement agreement and promissory note. The
district court ordered the settlement agreement claims to
arbitration, but retained jurisdiction over the promissory note
claim.
Shortly after the district court lifted a discovery stay,
FibroGen moved for summary judgment. The district court granted
the motion, finding that FibroGen established its claim for
breach of the promissory note as a matter of law. The district
court then awarded FibroGen damages of $395,000, plus $146,149.33
in prejudgment interest and $95,177.58 in attorney’s fees.
Cellex-C timely appealed.
On appeal, Cellex-C argues that it presented sufficient
1
The settlement agreement provides that it is to be
construed under New York law.
2
evidence of a fraudulent-inducement affirmative defense to
prevent summary judgment. This defense is based on Cellex-C’s
contention that, during the settlement talks, FibroGen
misrepresented the status of its licensing negotiations with
another company. According to Cellex-C, the advanced stage of
these negotiations was a critical part of its decision to enter
into the settlement agreement and the related promissory note.
Cellex-C argues that it only stopped paying on the note after
discovering FibroGen’s misrepresentation.
Nevertheless, Cellex-C never raised this affirmative defense
before the district court. Fraudulent inducement does not appear
in Cellex-C’s answer. More importantly, it cannot be found in
Cellex-C’s response to FibroGen’s motion for summary judgment.
This response contained two objections. First, Cellex-C
contended that FibroGen had itself materially breached the
contracts by failing to defend certain patents, failing to report
royalties, and breaching its duty of good faith and fair dealing.
Second, Cellex-C argued that the promissory note had been
modified.
We review issues raised for the first time on appeal for
plain error. Riley Stoker Corp. v. Fid. & Guar. Ins.
Underwriters, 26 F.3d 581, 589 (5th Cir. 1994). Under this
standard, we have the discretion to correct “a plain forfeited
error affecting substantial rights if the error seriously affects
3
the fairness, integrity or public reputation of judicial
proceedings." Douglass v. United Serv. Auto. Ass’n, 79 F.3d
1415, 1424 (5th Cir. 1996)(en banc)(quoting United States v.
Olano, 507 U.S. 725,736).
Cellex-C argues that caselaw does not require it to have
raised the specific fraudulent inducement argument before the
district court. Admittedly, Cellex-C’s good faith and fair
dealing argument was, like its current fraudulent inducement
argument, based on allegations involving FibroGen’s licensing
negotiations.2 Cellex-C claims that, by raising the issue of the
these negotiations in another context, it presented the district
court with sufficient evidence of a fraudulent inducement
defense. Therefore, according to Cellex-C, its failure to
actually raise fraudulent inducement should not matter. In
essence, Cellex-C contends that by presenting this evidence for
its breach of good faith and fair dealing argument, it put the
fraudulent inducement issue into play.
The cases that Cellex-C cites do not adequately support this
2
Notably, Cellex-C’s discussion of good faith and fair
dealing in its summary judgment response only contends that
FibroGen told it about the proposed license agreement. Nowhere
does it indicate that FibroGen’s representation was false, which
is one of the elements of a fraudulent inducement claim under New
York law. See Banque Arabe et Internationale D’Investissement v.
Maryland Nat. Bank, 57 F.3d 146, 153 (2d Cir. 1995).
4
argument, however.3 These cases mostly deal with the effect of
attaching evidence to summary judgment response but not
specifying what issue that evidence supports. See, e.g., Keiser
v. Coliseum Props., Inc., 614 F.2d 406, 410 (5th Cir. 1980).4
One case that Cellex-C cites points out this distinction:
Neither the cited cases nor the case before us now deals
with raising a distinct issue for the first time on
appeal or introducing new material into the record on
appeal, but rather with the failure of an opponent to
summary judgment to point out to the district court
support already in the record for the position that an
issue is actually shown by the record to be in dispute.
Nicholas Acoustics & Specialty Co. v. H & M Constr. Co., 695 F.2d
839, 846 n.7 (5th Cir. 1983).
Thus, nothing in the caselaw removes this case from the
ordinary rule: issues raised for the first time on appeal are
reviewed for plain error. Cellex-C’s fraudulent inducement
defense is this kind of issue, and thus we review it for plain
error. After conducting such a review, we conclude that the
district court did not plainly err in granting summary judgment.
AFFIRMED.
3
Cellex-C never addresses the plain error standard of
review. Instead, Cellex-C only challenges FibroGen’s second
argument that it completely waived this defense by failing to
plead it in its answer.
4
Other cases Cellex-C cites address raising an issue at
summary judgment that has not been included in the pleadings.
See, e.g., Eastland v. Tenn. Valley Auth., 553 F.2d 364, 370 (5th
Cir. 1977).
5