Savant Neglected Diseases, LLC v. Humanigen, Inc.

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
HUMANIGEN, INC. and MADISON
JOINT VENTURE LLC,
Plaintiffs,
v.
C.A. N17C-07-068-PRW CCLD
SAVANT NEGLECTED DISEASES,
LLC,
Defendant.
SAVANT NEGLECTED DISEASES,
LLC,
Plaintiff,
v. C.A. No. 2019-0417-PRW
HUMANIGEN, INC.,
NOMIS BAY LTD., and MADISON
JOINT VENTURE LLC,
Defendants.
Submitted: April 8, 2021
Decided: July 9, 2021
Upon Savant Neglected Diseases, LLC’s Motion for Summary Judgment,
DENIED.
Upon Humanigen, Inc., Nomis Bay Ltd., and Madison Joint Venture LLC’s Motion
for Summary Judgment,
GRANTED IN PART, DENIED IN PART.
Upon Nomis Bay Ltd.’s Motion for Summary Judgment,
GRANTED.
MEMORANDUM OPINION AND ORDER
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Jeffrey L. Moyer, Esquire, Travis S. Hunter, Esquire, Katharine L. Mowery, Esquire,
Tyler E. Cragg, Esquire, RICHARDS, LAYTON & FINGER, P.A., Wilmington,
Delaware, Attorneys for Humanigen, Inc., Nomis Bay Ltd., and Madison Joint
Venture LLC.
Steven P. Wood, Esquire, Travis J. Ferguson, Esquire, MCCARTER & ENGLISH, LLP,
Wilmington, Delaware; Reid Skibell, Esquire, HARRIS, ST. LAURENT & WECHLSER
LLP, New York, New York; Mazin A. Sbaiti, Esquire, J. Michal Zapendowski,
Esquire, SBAITI & COMPANY LLC, Dallas, Texas, Attorneys for Savant Neglected
Diseases, LLC.
WALLACE, J.
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This case concerns accusations of fraud and breach-of-contract stemming
from disputes over the parties’ efforts to bring benznidazole to the U.S. market as a
treatment for Chagas disease.1 Savant Neglected Diseases, LLC and Humanigen,
Inc.2 entered a contractual agreement (the “MDC”)3 to develop benznidazole and
pursue FDA approval using Savant’s proprietary data. After that relationship
collapsed, Humanigen sought to develop a source of venture capital using an
investment vehicle—Madison Joint Venture LLC—through which Humanigen
partnered with its principal creditor, Nomis Bay Ltd., to generate returns from the
development of, and litigation surrounding, benznidazole.4
Humanigen, later joined by Madison, sued Savant in this Court.5 Savant first
removed to the United States District Court for the District of Delaware,6 but then,
1
Chagas disease is a tropical disease caused by an insect-borne parasitic infection. In addition
to acute symptoms that may or may not present immediately after exposure, years or decades later
infected people may develop a chronic form. Both the acute and chronic courses of Chagas disease
are life-threatening. See generally Parasites – American Trypanosomiasis, CTRS. FOR DISEASE
CONTROL & PREVENTION, https://www.cdc.gov/parasites/chagas/gen_info/detailed.html (last
visited June 21, 2021).
2
Then known as KaloBios.
3
Savant’s Mot. to Dismiss Ex. A (D.I. 156). Hereinafter, all references to the Superior Court
docket, Humanigen, Inc. v. Savant Neglected Diseases, LLC, N17C-07-068, are styled “D.I.” All
references to the Court of Chancery docket, Savant Neglected Diseases, LLC v. Humanigen, Inc.,
2019-0417, are styled “Del. Ch. D.I.”
4
H&M’s Second Am. Compl. ¶ 137, Oct. 17, 2019 (D.I. 138).
5
H&M’s Compl., July 10, 2017 (D.I. 1); H&M’s Am. Compl., Aug. 12, 2019 (D.I. 93); H&M’s
Second Am. Compl., Oct. 17, 2019 (D.I. 138).
6
Notice of Filing Notice of Removal (D.I. 5).
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after remand,7 filed its own action in the Court of Chancery against Humanigen and
Madison8 and ultimately, Nomis Bay.9 All claims in both suits concern the MDC.10
And the undersigned has been designated to hear all consolidated claims in both
Court’s cases.
I. FACTUAL BACKGROUND11
All parties here agree that a non-party competitor, Chemo Research,
misappropriated Savant’s data and used it to obtain FDA approval and market
exclusivity for benznidazole ahead of Savant and Humanigen.12 Humanigen sued
Savant in this Court, and Madison sued Chemo Research in the New Jersey federal
7
Order Remanding Case, Feb. 5, 2019 (D.I. 9).
8
Savant’s Compl., June 4, 2019 (Del. Ch. D.I. 1).
9
Savant’s First Am. Compl. (Del. Ch. D.I. 11).
10
On August 17, 2020, the Court issued an order and opinion granting and denying certain
summary judgment and dismissal motions. Humanigen, Inc. v. Savant Neglected Diseases, LLC,
238 A.3d 194, 207–08 (Del. Super. Ct. 2020). The Court denied Savant’s champerty claim, finding
that Humanigen was within its rights to assign the contract and litigation to Madison. Id. at 205.
Humanigen remains a surety of Madison to Savant for performance under the MDC. Id. at 206.
Further, the Court dismissed Humanigen from all counts in its joint Superior Court complaint with
Madison. Id. at 208. But Humanigen remains a litigant in the Savant Chancery complaint. Id. at
207-08.
11
The Court directs readers to its August 17, 2020, opinion and order for supplemental
background information and procedural history. See generally Id. In turn, the Court assumes the
parties’ familiarity with the facts involved in this case, including those not explicitly recounted
herein.
12
E.g., H&M’s Second Am. Compl. ¶¶ 5, 14.
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district court (the “New Jersey Suit”).13 For its part, Savant alleges that Humanigen
had advance warning of the imminence of Chemo Research’s FDA approval and the
latter’s wrongful misappropriation of Savant’s proprietary data.14 Savant also
alleges that Humanigen withheld this information and abandoned its work on
benznidazole, deciding to pursue litigation instead.15
Nomis Bay and Humanigen created and organized Madison in February
2018.16 Nomis Bay and Humanigen are the sole members of Madison, owning 70
percent and 30 percent respectively.17 Relevant here, that structure involved
Humanigen’s assignment to Madison of its MDC rights, including the license to
benznidazole and its litigation rights against both Savant and Chemo Research.18
Last year, the Court issued an Opinion and Order dismissing Humanigen from
all counts of its joint Superior Court complaint with Madison due to Humanigen’s
13
See generally Compl., Madison Joint Venture LLC v. Chemo Research S.L., 2:19-cv-08012
(D.N.J. Mar. 7, 2019).
14
Savant’s First Am. Compl. ¶¶ 59–62, Aug. 27, 2019 (Del. Ch. D.I. 11).
15
Id.
16See Transmittal Aff. of Travis S. Hunter Ex. 15 at 4, Aug. 27, 2019 (D.I. 107) [hereinafter
“Madison Operating Agreement”] (“‘Effective Date’ means February 27, 2018.” (emphasis
omitted)).
17
Madison Operating Agreement Ex. A.
18
Madison Operating Agreement Ex. B at 1–2.
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lack of standing.19 Now, three summary judgment motions pend before the Court:
one from Humanigen20 and Madison (“H&M”), one from Nomis Bay, and one from
Savant. H&M move for summary judgment against Savant’s Second Amended
Complaint and its Bankruptcy Proceeding Counterclaims.21 Nomis Bay moves for
summary judgment against Savant’s fraudulent transfer claim.22 Savant moves for
partial summary judgment on four counts of H&M’s Second Amended Complaint,
one count of Savant’s Second Amended Complaint, and two counts of Savant’s
Bankruptcy Proceeding Counterclaims.23 All are now ripe for decision.
II. APPLICABLE LEGAL STANDARDS
“Summary judgment is appropriate where the record demonstrates that ‘there
19
Humanigen, 238 A.3d at 205–08 (holding that Humanigen assigned its right to sue Savant to
Madison but remained a surety for Madison’s performance under the MDC, so Humanigen’s
claims against Savant in the Superior Court action are dismissed but it remains a defendant in
Savant’s Chancery Court action.).
20
While Humanigen was declared not to have standing to press its joint Superior Court
complaint, each party refers to Humanigen and Madison as a unit and the two entities share a unity
of interests; so, to avoid unnecessary confusion, both parties will be referred to as “H&M” except
where it is particularly relevant to distinguish between the two.
21
H&M’s Mot. for Summ. J., at 1 (D.I. 377).
22
Nomis Bay’s Mot. for Summ. J., at 25 (D.I. 378).
23
Savant’s Mot. for Partial Summ. J., at 4 (D.I. 379). Savant “has decided to no longer pursue
its breach of contract claims based on champerty, the assignment to Madison, and the change-of-
control provision (Counts 1 and 3); its separate constructive trust claim (Count 5), though it still
seeks that remedy for its fraudulent transfer claim (Count 4); and counterclaims 3, 4, and 6.”
Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J., at 19 n.6 (D.I. 393). Given this winnowing,
the Court expects the parties to stipulate to those counts’ dismissals. See Del. Super. Ct. Civ. R.
41.
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is no genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.’”24 “But, summary judgment will not be granted if ‘a
material fact is in dispute’ or it ‘seems desirable to inquire thoroughly into [the facts]
to clarify the application of the law to the circumstances.’”25 The movant bears the
initial burden of demonstrating its motion is supported by undisputed material
facts.26 If that burden is met, then the non-movant must demonstrate that there is a
“genuine issue for trial.”27 And to determine whether there is a genuine issue, the
Court construes the record in the light most favorable to the non-movant.28
This framework “is not altered” by the presence of cross-motions for summary
judgment.29 Where cross-motions for summary judgment are filed on a particular
issue and neither party argues the existence of a genuine issue of material fact
thereon, “the Court shall deem the motions to be the equivalent of a stipulation for
24
Parexel Int’l (IRL) Ltd. v. Xynomic Pharms., Inc., 2020 WL 5202083, at *4 (Del. Super. Ct.
Sept. 1, 2020) (quoting Del. Super. Ct. Civ. R. 56(c)); see also Brzoska v. Olson, 668 A.2d 1355,
1364 (Del. 1995) (“If the facts permit reasonable persons to draw but one inference, the question
is ripe for summary judgment.”).
25
Unbound Partners Ltd. P’ship v. Invoy Holdings Inc., 2021 WL 1016442, at *4 (Del. Super.
Ct. Mar. 17, 2021) (alteration in original) (quoting Ebersole v. Lowengrub, 180 A.2d 467, 468–69
(Del. 1962)).
26
Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979).
27
Del. Super. Ct. Civ. R. 56(e).
28
Judah v. Del. Tr. Co., 378 A.2d 624, 632 (Del. 1977).
29
Total Care Physicians, P.A. v. O’Hara, 798 A.2d 1043, 1050 (Del. Super. Ct. 2001) (internal
quotation marks omitted).
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decision on the merits based on the record submitted with the motions.”30 Still, “the
presence of cross motions for summary judgment does not act per se as a concession
that there is an absence of factual issues.”31 “Even when presented with cross-
motions for summary judgment, the [C]ourt is not relieved of its obligation to deny
summary judgment if a material factual dispute exists.”32 In determining whether
material facts are in dispute, the Court evaluates each motion separately.33 And,
consistent with Rule 56 review, the Court will deny summary judgment and submit
the case to a fact finder if “it is not reasonably certain that there is no triable issue”
of fact.34 For though “summary judgment is encouraged when possible, there is no
30
Del. Super. Ct. Civ. R. 56(h).
31
United Vanguard Fund, Inc. v. TakeCare, Inc., 693 A.2d 1076, 1079 (Del. 1997).
32
Fasciana v. Elec. Data Sys. Corp., 829 A.2d 160, 166 (Del. Ch. 2003).
33
See Empire of Am. Relocation Servs., Inc. v. Com. Credit Co., 551 A.2d 433, 435 (Del. 1988)
(“It is imperative that the court consider whether there is a genuine issue of material fact each time
[summary judgment] motions are presented.”).
34
Unbound, 2021 WL 1016442, at *4 (internal quotation marks omitted); see Cont’l Ins. Co. v.
Rutledge & Co., Inc., 750 A.2d 1219, 1227–28 (Del. Ch. 2000) (“[T]he Court [] maintains the
discretion to deny summary judgment if it decides a more thorough development of the record
would clarify the law or its application.” (citing Alexander Indus., Inc. v. Hill, 211 A.2d 917, 918–
19 (Del. 1965))); cf. Jeffries v. Kent Cty. Vocational Tech. Sch. Dist. Bd. of Educ., 743 A.2d 675,
677 (Del. Super. Ct. 1999) (“[A] matter should be disposed of by summary judgment whenever a
question of law is involved and a trial is unnecessary.” (emphasis added) (citing State ex rel.
Mitchell v. Wolcott, 83 A.2d 759, 761 (Del. 1952))); see also Cerberus Int’l, Ltd. v. Apollo Mgmt.,
L.P., 794 A.2d 1141, 1150 (Del. 2002) (“The trial court may deny summary judgment in a case
where there is reason to believe that the better course would be to proceed to a full trial.” (cleaned
up)).
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absolute right to summary judgment.”35
III. DISCUSSION
A. H&M’S SUMMARY JUDGMENT MOTION TARGETING SAVANT’S
SECOND AMENDED COMPLAINT
1. Declaratory Judgment that Savant is Entitled to Its Portion of
Any Recovery from the New Jersey Action (Count II).
Savant seeks a declaration that it is entitled to the proceeds from Madison’s
role in the New Jersey Suit.36 Madison contends that the claim is “unripe, precluded
by contract, and has been waived.”37
The Court’s power to issue a declaratory judgment derives from the Delaware
Declaratory Judgment Act.38 A declaratory judgment “is designed to promote
preventative justice.”39 It is “[b]orn out of practical concerns,”40 enabling a court to
decide a controversy “prior to the time when a remedy is traditionally available” by
catalyzing the matter to justiciability.41 “Not all disputes, however, are appropriate
35
AeroGlobal Cap. Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 443 (Del. 2005).
36
Savant’s Second Am. Compl. ¶¶ 98–106 (D.I. 302). Savant is not pursuing Count I. Savant’s
Br. in Opp’n to H&M’s Mot. for Summ. J., at 17 n.6.
37
H&M’s Br. in Opp’n to Savant's Partial Mot. for Summ. J., at 32.
38
See generally DEL. CODE ANN. tit. 10, § 6501 (2020).
39
Schick Inc. v. Amalgamated Clothing & Textile Workers Union, 533 A.2d 1235, 1237–38 (Del.
Ch. 1987) (quoting Stabler v. Ramsey, 88 A.2d 546, 557 (Del. 1952)).
40
Id. at 1238.
41
Diebold Comput. Leasing, Inc. v. Com. Credit Corp., 267 A.2d 586, 591–92 (Del. 1970).
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for judicial review when the parties request it.”42 A declaratory judgment request
presupposes a still-evolving controversy, imposing jurisdictional limitations.43 A
court cannot accelerate an embryonic matter to a stage traditionally justiciable if
doing so would produce an advisory opinion along the way.44 Stated prudentially, a
court cannot issue a declaratory judgment unless the matter is sufficiently ripe.45 To
pronounce a declaration before the facts have ripened “not only increases the risk of
an incorrect judgment in the particular case, but risks, as well, an inappropriate or
unnecessary step in the incremental law building process itself.”46 Accordingly, the
viability of Savant’s allegations depends on their ripeness.
A ripeness challenge attacks a court’s subject matter jurisdiction, and so may
be fended sua sponte.47 “A case is ripe for judicial review when the dispute has
42
Town of Cheswold v. Cent. Del. Bus. Park, 188 A.3d 810, 816 (Del. 2018).
43
E.g., Schick, 533 A.2d at 1238–39 (“A number of important concerns have led courts . . . to
decline [declaratory judgment] jurisdiction in instances in which a controversy is deemed to have
not yet matured to a point at which judicial action is appropriate.”).
44
Stroud v. Milliken Enters., Inc., 552 A.2d 476, 479 (Del. 1989).
45
Rollins Int’l, Inc. v. Int’l Hyrdonics Corp., 303 A.2d 660, 662–63 (Del. 1973).
46
Schick, 533 A.2d at 1239; accord Stroud, 552 A.2d at 480; see also XL Specialty Ins. Co. v.
WMI Liquidating Tr., 93 A.3d 1208, 1217 (Del. 2014) (“The underlying purpose of the [ripeness]
principle is to conserve limited judicial resources and to avoid rendering a legally binding decision
that could result in premature and possibly unsound lawmaking.” (citing Stroud, 552 A.2d at 480)).
47
E.g., B/E Aerospace, Inc. v. J.A. Reinhardt Holdings, LLC, 2020 WL 4195762, at *2–3 (Del.
Super. Ct. July 21, 2020); see Del. Super. Ct. Civ. R. 12(h)(3) (directing dismissal “[w]henever it
appears by suggestion of the parties or otherwise” that this Court lacks subject matter jurisdiction).
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matured to the point where the [claimant] has suffered or will imminently suffer an
injury.”48 In other words, a case “will be deemed ripe if litigation sooner or later
appears to be unavoidable and where the material facts are static.”49 In contrast, “[a]
dispute will be deemed not ripe where the claim is based on uncertain and contingent
events that may not occur, or where future events may obviate the need for judicial
intervention.”50 Ascertaining the difference “involves interest balancing, weighing
‘the interests of the court . . . in postponing judicial review until the question arises
in some more concrete and final form’ against ‘the interests of those who seek relief
from the challenged action’s immediate and practical impact upon them.’”51
As an initial matter, Savant contends elliptically that the Court’s prior opinion
“implicitly rejected” a ripeness challenge.52 But the Court did no such thing. And
even if it did, subject matter jurisdiction can be raised at any time,53 despite not
48
Town of Cheswold, 188 A.3d at 816.
49
XL Specialty, 93 A.3d at 1217.
50
Id. at 1217–18 (internal quotation marks and citation omitted).
51
Goldenberg v. Immunomedics, Inc., 2021 WL 1529806, at *19 (Del. Ch. Apr. 19, 2021) (quoting
Schick, 533 A.2d at 1239).
52
Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J., at 21 (“Copying from their failed motion
to dismiss, Plaintiffs contend that Savant’s declaratory judgment claim is not ripe for adjudication.
That argument was implicitly rejected by the Court in denying their motion to dismiss. See
Humanigen[, 238 A.3d at 202] (finding that Savant’s challenged claims stated valid causes of
action).”).
53
E.g., B/E Aerospace, 2020 WL 4195762, at *2 (“As [a] subject matter jurisdiction challenge[],
[ripeness] might be raised sua sponte by the Court at any time.” (emphasis added)).
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having been recognized as a problem before.54 The Court thus takes the issue up
afresh.
In support of ripeness, Savant contends “[t]he issue is ripe because there are
sufficient facts before the Court to enable an analysis of the contractual language in
issue as well as the facts surrounding Humanigen’s material breaches[.]”55 But, as
Madison notes, resolution of the New Jersey Suit “is years away” and the associated
recovery and jury award are speculative.56 Because of that, the Court should not
engage in theoretical allocations and apportionment before that judgment is absolute.
After all, it is entirely possible that nothing will be awarded, and accordingly,
entirely possible that a decision here will be but an advisory opinion.
Nonetheless, Savant cites the following passage from Rollins International,
Inc. v. International Hydronics, Corp.57 to imply that a court can provide an advisory
opinion when deciding a declaratory judgment claim.58
54
E.g., Stroud, 552 A.2d at 477 (dismissing appeal as unripe where the Supreme Court raised
ripeness for the first time at oral argument); see also Perlman v. Vox Media, Inc., 2019 WL
2647520, at *4–5 (Del. Ch. June 27, 2019) (dismissing for lack of subject matter jurisdiction on
summary judgment despite denying a motion to dismiss earlier in the case).
55
Savant’s Second Am. Compl. ¶ 106.
56
H&M’s Br. in Opp’n to. Savant's Partial Mot. for Summ. J., at 33.
57
303 A.2d 660 (Del. 1973).
58
Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J., at 21.
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While it is true that courts will not entertain suits seeking an advisory
opinion or an adjudication of hypothetical questions, the courts do
entertain declaratory judgment actions where the alleged facts are such
that a true dispute exists and eventual litigation appears to be
unavoidable.59
Nothing in this language, though, suggests an advisory opinion ever is permissible.
That aside, Rollins’ “unavoidable” language seems hardly consonant with the very
real possibility here that nothing will be recovered in the New Jersey Suit.
Accordingly, Savant’s declaratory judgment claim (Count II) is DISMISSED, and
H&M’s Summary Judgment Motion on this claim is MOOT.
2. Fraudulent Transfer Against H&M (Count IV).
Title 6, § 1304(b) of the Delaware Code sets forth eleven factors (or badges)
for determining whether there is an “actual intent to hinder, delay or defraud any
creditor of the debtor[.]”60 That Section, in turn, refers to § 1304(a)(1), and “[c]laims
for actual fraudulent transfer brought under § 1304(a)(1) must meet the heightened
pleading standard of Superior Court Civil Rule 9(b).”61 Rule 9(b) requires
particularized pleading of the circumstances surrounding the alleged fraud and
generalized pleading of the alleged fraudster’s knowledge.62 Accordingly, to state a
59
Rollins, 303 A.2d at 662.
60
DEL. CODE ANN. tit. 6, § 1304(b) (cross-referencing DEL. CODE ANN. tit. 6, § 1304(a)(1)).
61
Ki-Poong Lee v. So, 2016 WL 6806247, at *3 (Del. Super. Ct. Nov. 17, 2016).
62
Del. Super. Ct. Civ. R. 9(b); see also Trenwick Am. Litig. Tr. v. Ernst & Young, L.L.P., 906
A.2d 168, 207–08 (Del. Ch. 2006) (identifying the “circumstances” that must be pleaded with
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fraudulent transfer claim, a plaintiff “must generally plead facts showing intent to
defraud with specific supporting facts describing the circumstances of the
transfer.”63
In moving against this claim, H&M contend “Savant meets none of the
requirements necessary to establish an actual fraudulent transfer” and cite certain
factual circumstances indicating solvency.64 All this is beside the point. At this
stage, Savant need not prove an actual fraudulent transfer. Instead, Savant must
show there are material facts in dispute.65 It has.
In support of its contention that Humanigen was insolvent when it transferred
the benznidazole assets, Savant highlights: (1) a statement by the Court in its August
17, 2020 opinion; (2) a statement by Nomis Bay in Savant’s request for admissions;
(3) Humanigen’s consideration of bankruptcy; (4) Humanigen’s financial
statements; and (5) Humanigen’s inability to pay its obligations, including to its
lawyers and board members.66 Given this record evidence, there is a material fact
particularity, which include “the time, place and contents of the false representations” and “what
that [alleged fraudster] gained from making the representation), aff’d sub nom., Trenwick Am.
Litig. Tr. v. Billett, 2007 WL 2317768 (Del. Aug. 14, 2007).
63
Quadrant Structured Prods. Co., Ltd. v. Vertin, 102 A.3d 155, 198 (Del. Ch. 2014).
64
H&M’s Mot. for Summ. J., at 43.
65
Id.
66Savant’s Br. in Opp’n to Nomis Bay’s Mot. for Summ. J., at 10-12 (D.I. 392).
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in dispute—i.e., whether Humanigen was insolvent—that must be developed more
thoroughly.67 As observed, “[t]he Court may, in its discretion, deny summary
judgment if it decides, upon examination of the facts presented, that it is desirable to
inquire into or develop more thoroughly the facts at trial in order to clarify the law
or its application.”68 Accordingly, summary judgment is DENIED.
3. Breach of Contract (Warrant) Against Humanigen (Count VI).
Savant has alleged that Humanigen breached the terms of a Common Stock
Purchase Warrant by not fulfilling its obligation after Savant met the provision’s
requirements.69 Savant travels a peculiar path to that claim.
As a first step, Savant narrows Count VI saying it “intends only to pursue its
claim related to Humanigen abandoning its performance obligations, which
prevented Humanigen from triggering Savant’s rights under the Warrant.”70 It next
avers that “[t]he basis for the claim is thus identical to Count [III].”71 Savant then,
67
Bobcat N. Am., LLC v. Inland Waste Holdings, LLC, 2019 WL 1877400, at *4 (Del. Super. Ct.
Apr. 26, 2019).
68
In re Morrow Park Holding LLC, 2018 WL 2123273, at *2 (Del. Ch. Mar. 28, 2018); see also
McCabe v. Wilson, 1986 WL 8008, at *2 (Del. Super. Ct. June 26, 1986) (“[S]ound judicial
administration may dictate withholding judgment until the whole factual structure stands upon a
solid foundation following a plenary trial where proof can be fully developed, questions answered
and issues clearly focused.”).
69
Savant’s Second Am. Compl. ¶¶ 127–28.
70
Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J., at 45–46.
71
Id. at 46.
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without elaborating further on Count VI, asks the Court to look to the arguments in
Count III to support its claim and related opposition to H&M’s Motion.72 In Count
III—which Savant is no longer pursuing—it says Humanigen breached its obligation
to develop benznidazole.73 And ending this journey, Savant ultimately argues that
summary judgment is improper because (a) granting it would violate the prevention
doctrine; and (b) Humanigen did not perform diligently under the MDC. Both
arguments fail.
a. The Prevention Doctrine Does Not Bar H&M’s Failure of a
Condition Precedent Argument.
Savant argues that Humanigen failed to perform under the contract, causing
milestones not to be met, which blocked Savant from receiving milestone
payments.74 In other words, Savant invokes the prevention doctrine.
“[U]nder the prevention doctrine[,] a duty to perform is excused if the other
[] party wrongfully prevented the condition from occurring.”75 The operative
language is wrongful prevention because “there is no prevention claim where the
72
Id.
73Savant’s Second Am. Compl. ¶¶ 113–14.
74
Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J., at 43.
75
Bobcat, 2019 WL 1877400, at *6; see also RESTATEMENT (SECOND) OF CONTRACTS § 245 cmt.
a (AM. L. INST. 1981) (a condition’s non-occurrence is excused “where [] lack of cooperation
constitutes a breach,” including a breach of “a duty imposed by the terms the agreement itself.”).
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contract, in effect, authorizes prevention.”76 In turn, the central question is whether
“the contract allocated the risk of the condition’s nonoccurrence[,]” i.e., whether the
party had assumed the risk that a condition precedent would not be satisfied.77
Delaware courts have applied the prevention doctrine’s assumption-of-risk
exception when the contract (i) uses explicit language to authorize prevention; or (ii)
when “contract terms condition the consummation of a transaction upon the approval
of the other party, or subject one party to the discretion, satisfaction, or decision of
the other party or a third-party.”78 A contract between “sophisticated parties
experienced in their industry, weighs in favor of finding an assumption of risk[.]”79
The MDC contemplated a risk of nonoccurrence. It provides a milestone table
(Section 3.3) and declares, in part, that “[Humanigen] shall pay to [Savant] each of
the following one-time milestone payments (the “Milestone Payments”) promptly,
but in no event later than within fifteen (15) days after the first achievement of the
corresponding milestone event, if such milestone is achieved[.]”80 Plainly, the
conditional language itself—that milestone payments are made “if such milestone is
76
Bobcat, 2019 WL 1877400, at *6 (internal quotation marks omitted).
77
Id. (citation omitted).
78
Id. at *7 (citation omitted).
79
Id. at *8.
80
Savant’s Mot. to Dismiss Ex. A at § 3.3 (D.I. 156) [hereinafter MDC].
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achieved”—confirms that there is a risk of the condition’s nonoccurrence. And, as
both parties are sophisticated operators in this industry, they know FDA approval is
a risk assumed, triggering an exception to the prevention doctrine. Accordingly, the
prevention doctrine doesn’t bar H&M’s claim.
b. The Condition Requiring Humanigen to Perform Diligently Wasn’t Met.
The next piece of Savant’s opposition concerns a condition precedent. The
effect of a condition precedent is a question of contract interpretation, and therefore,
of law.81 The burden is on the party claiming breach to demonstrate that a condition
precedent to the underlying duty has been satisfied.82 A breach-of-contract claim
anchored to an obligation that is contingent on an unexcused or unsatisfied condition
precedent is not cognizable.83
H&M argues that once Chemo Research obtained FDA approval, H&M didn’t
need to perform to the level that Savant demanded.84 It points to MDC Section 5.3,
81
See, e.g., Casey Emp. Servs., Inc. v. Dali, 1993 WL 478088, at *4 (Del. Nov. 18, 1993).
82
E.g., S’holder Rep. Servs. LLC v. Shire US Holdings, Inc., 2020 WL 6018738, at *17 (Del. Ch.
Oct. 12, 2020) (explaining burden-shifting in the contractual condition context); see also Williams
Cos., Inc. v. Energy Transfer Equity, L.P., 159 A.3d 264, 273 (Del. 2017) (“[O]nce a breach of a
covenant is established, the burden is on the breaching party to show that the breach did not
contribute materially” to the non-occurrence of a condition. (citing RESTATEMENT (SECOND) OF
CONTRACTS § 245 cmt. b)).
83
Cf. Brazen v. Bell Atl. Corp., 1997 WL 153810, at *2 (Del. Ch. Mar. 19, 1997) (“[The] claim
is not dependent on occurrence of [a] condition precedent, and is, therefore, ripe for
adjudication.”); RESTATEMENT (SECOND) OF CONTRACTS § 235 (“When performance of a duty
under a contract is due any non-performance is a breach.” (emphasis added)).
84
H&M’s Br. in Opp’n to Savant's Partial Mot. for Summ. J., at 23.
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which defines “Diligent Efforts” to include “level of effort and reasonable standard
in the biopharmaceutical industry[.]”85 Furthermore, it continues, neither party is
liable for a performance obligation or breach if “such failure or delay is due to any
occurrence beyond the reasonable control of such Party[.]”86 In opposition, Savant
says that, although FDA approval was certainly a hinderance, the Agreement was
not limited to the United States.87 Specifically, it asserts that MDC Section 5.4
provides for the development and commercialization of benznidazole outside of the
United States.88
But MDC Section 5.4 requires an unambiguous condition precedent to be met:
As soon as reasonably practicable but in any event within twelve (12)
months of the date of submission of an NDA for the Product to the
FDA, [Humanigen] shall conduct and complete, and deliver a complete
copy of, a feasibility analysis of conducting development and
commercialization of the Product in countries currently in the European
Union and in Japan.89
Despite that, Savant insists that “[o]n June 25, 2017, Humanigen achieved the first
milestone event, acceptance of a NDA for benznidazole[.]”90 The record, however,
85
Id. at 24.
86
Id. at 28; MDC § 15.1.
87
Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J., at 45.
88
MDC § 5.4 (“Development, Commercialization outside the United States”).
89
Id.
90
Savant’s Mot. for Summ. J., at 44.
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including the milestone schedules, belies Savant’s contentions.91 Savant’s confusion
of the Investigational New Drug (IND) for the New Drug Application (“NDA”)
dooms its defense. Because the condition preceding Humanigen’s performance was
not met, Humanigen was not required to perform. Accordingly, H&M’s Motion for
Summary Judgment on Count VI (Breach of Contract) is granted.
B. H&M’S SUMMARY JUDGMENT MOTION AGAINST SAVANT’S
BANKRUPTCY PROCEEDING COUNTERCLAIMS
H&M insists that the Court should grant summary judgment on all of Savant’s
Bankruptcy Proceeding Counterclaims because Savant did not reassert these claims
after the conclusion of the bankruptcy action.92 Says H&M, “[b]y not reasserting
the claims in Chancery Court, Savant has waived them and allowing Savant to
pursue them now would amount to allowing claim splitting.”93 So, at bottom,
H&M’s argument against all six claims is that they are no longer part of the litigation
and that allowing them to survive now would be condoning the sort of claim splitting
Delaware courts won’t tolerate.94
91
H&M Mot. for Summ. J. Ex. 9 at 218 (Deposition of Reimar C. Bruening, Ph.D., Jan. 11,
2021) (“But I think the most important part to capitalize on what Humanigen had at the time after
the Chemo NDA was granted was actually their process.”).
92
Savant’s Mot. for Partial Summ. J., at 3–4; Savant’s Br. in Opp’n to H&M’s Mot. for Summ.
J., at 45.
93
Savant’s Mot. for Partial Summ. J., at 3–4; Savant’s Br. in Opp’n to H&M’s Mot. for Summ.
J., at 45.
94
H&M’s Mot. for Summ. J., at 45.
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1. Savant’s Counterclaims are Still Part of the Immediate Case.
H&M’s argument that the counterclaims are no longer part of the proceeding
rests, in part, on an email exchange between counsel in which H&M demanded a
legal citation to defend against its position that the counterclaims were no longer in
the case.95 But, though H&M contends that “Savant never reasserted these
counterclaims after this action was remanded,” it answered these counterclaims on
February 12, 2018.96 Too, Savant’s counterargument is persuasive. Savant contends
that “[c]ourts [] have considered [H&M’s waiver argument and] have rejected it
because an answer and counterclaims serve different purposes, and like claims raised
in a pleading, counterclaims remain part of the case until dismissed.”97 As support,
Savant turns to federal district court’s decision in Hughes v. Abell.98 There, the court
confronted a similar issue concerning counterclaims.99 And there, the court rejected
the precise waiver argument H&M makes here, finding that the “[defendant]’s later
filing did not abandon the counterclaims.”100 H&M offers little—and certainly, no
95
Id. at 45, Ex. 51.
96
Id. at 45; see H&M’s Answer to Savant’s Countercls. (D.I 10).
97
Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J., at 46–47; see generally Hughes v. Abell,
867 F. Supp. 2d 76 (D.D.C. 2012).
98
Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J., at 46–47 (citing Hughes, 867 F. Supp.
2d at 91).
99
Hughes, 867 F. Supp. 2d at 91.
100
Id.- 21 -
good—authority for shying from this view.101 Savant’s counterclaims are still part
of the immediate case.
2. Savant’s Bankruptcy Proceeding Counterclaims Do Not Evince
Claim Splitting.
H&M argues that the Court should grant it summary judgment because Savant
did not reassert these claims after the conclusion of the bankruptcy action.102 To
reiterate, H&M’s specific contention is “[b]y not reasserting the claims in Chancery
Court, Savant has waived them and allowing Savant to pursue them now would
amount to allowing claim splitting.”103
“Claim splitting occurs when a plaintiff sues the same defendant in different
courts on different causes of action arising out of a common underlying nucleus of
facts.”104 Delaware courts ask a tripartite question to determine whether claim
splitting has occurred: “(1) is there a prior action pending elsewhere; (2) in a court
101
Instead, H&M cites to J.L. v. Barnes, 33 A.3d 902, 918 (Del. Super. Ct. 2011) and Balin v.
Amerimar Realty Co., 1995 WL 170421, at *4 (Del. Ch. April 10, 1995) for the proposition that
claim splitting is inappropriate. But as the Court explains below, claim splitting hasn’t occurred
here. Additionally, H&M cites to Saudi Basic Indus. Corp. v. Mobil YanbuPetrochem. Co. 2003
WL 22048238, at *4 (Del. Super. Ct. Sept. 2, 2003) for the proposition that, since Savant’s 30(b)(6)
witness could not properly answer questions about the bankruptcy counterclaims, his response
should bind Savant. But the facts in Saudi Basic Indus. Corp. are distinguishable. There, the issue
was over the 30(b)(6) witness’s complete reversal of position and the subsequent effect that
reversal had on discovery. Id. at *3-4.
102
H&M’s Mot. for Summ. J., at 45.
103
Id.
104O’Rangers v. Cadia Rehab. Silverside, 2019 WL 1531520, at *6 (Del. Super. Ct. Apr. 8, 2019).
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capable of doing prompt and complete justice; (3) involving the same parties and the
same issues?”105
Here, the bankruptcy action was remanded to the Superior Court, and so these
counterclaims are not pending elsewhere. The Court, sitting here as both a court of
law and court of equity, has the power to rule on the entire matter. And, in some
arrangement or another, the parties in the previous bankruptcy case, previous
Chancery case, and current Superior Court case, are all the same litigants and
litigating over the same issues of fact. These claims have been part of the litigation,
have been answered by H&M, and thus do not constitute split claims.106
Accordingly, summary judgment is not appropriate here, and H&M’s Motion for
Summary Judgment on Savant’s Bankruptcy Counterclaims is DENIED.
C. NOMIS BAY’S SUMMARY JUDGMENT MOTION AGAINST SAVANT’S
FRAUDULENT TRANSFER CLAIM (COUNT IV)
Against the notion that it can be the target of a fraudulent transfer claim,
Nomis Bay argues that Delaware courts require the defendant in a fraudulent transfer
action either be the transferor (Humanigen) or the transferee (Madison).107 In
opposition, Savant contends that Humanigen made the transfer to benefit Nomis
105
LG Elecs., Inc. v. InterDigit. Commc’ns, Inc., 114 A.3d 1246, 1252 (Del. 2015).
106
H&M’s Mot. for Summ. J., at 45; see also H&M’s Answer to Savant’s Countercls.
107
Nomis Bay’s Mot. for Summ. J., at 12.
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Bay, roping it into a fraudulent transfer claim.108 Savant further asserts that “Nomis
Bay does not need to be a transferor or transferee to be liable under Delaware law;
it simply must be an intended beneficiary of a fraudulent transfer.”109 In support of
its assertion that Nomis Bay is the beneficiary, Savant states that “70% of the spoils
of any lawsuit [are given] to Nomis Bay[.]”110 A party’s beneficiary status in the
fraudulent transfer context is a question of law, making summary judgment a
possibility here.111
A non-transferor or non-transferee can be liable for fraudulent transfer if it is
a beneficiary of the fraudulent transfer.112 To detect beneficiary status, this Court
engages the same three-factor test bankruptcy courts use.113 The Court must
determine: (1) whether the benefit was received by the beneficiary; (2) whether the
benefit is quantifiable; and (3) whether the benefit is “accessible to the
108
Savant’s Br. in Opp’n to Nomis Bay’s Mot. for Summ. J., at 17.
109
Id. at 19 (citing In re Direct Response Media, Inc., 466 B.R. 626, 654 (Bankr. D. Del. 2012)).
110
Id.
111Pike Creek Recreational Servs., LLC v. New Castle Cty., 238 A.3d 208, 213 (Del. Super. Ct.
2020) (“[A] matter should be disposed of by summary judgment whenever only a question or
questions of law remain. . . .”).
112
DEL. CODE ANN. tit. 6, § 1308 (2020); In re Green Field Energy Servs. Inc. v. Moreno, 2018
WL 1116374, at *1 (Bankr. D. Del. Feb. 27, 2018).
113
In re Green Field Energy Servs. Inc., 2018 WL 1116374, at *1.
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beneficiary.”114 Under this test (with its requirement that all three factors are
present), Nomis Bay is not a beneficiary.
First, Nomis Bay hasn’t actually received a benefit.115 Though Savant believes
that Nomis Bay is set to receive “70% of the spoils,”116 future judgments are not
absolute. Second, and relatedly, these “spoils” are far from certain, and thus not
quantifiable. So, because two of three factors have not been satisfied, the Court need
not address the third. Accordingly, Nomis Bay does not meet the definition of a
beneficiary and as such cannot be liable for fraudulent transfer. Nomis Bay’s Motion
for Summary Judgment on Count IV of Savant’s Complaint is GRANTED.
D. SAVANT’S SUMMARY JUDGMENT AGAINST H&M’S
SECOND AMENDED COMPLAINT.
1. Breach and/or Anticipatory Breach of MDC Section 4.8 (Count I).
H&M seeks to set off the $2 million of milestone payments it owes to Savant
against the $3.8 million H&M believes Savant owes it.117 H&M points to MDC
Section 4.8 as the operative contractual section allowing for such credit.118 That
114
Id.
115See DEL. CODE ANN. tit. 6, § 1308; In re Green Field Energy Servs. Inc., 2018 WL 1116374,
at *1.
116
Savant’s Br. in Opp’n to Nomis Bay’s Mot. for Summ. J., at 19.
117
H&M’s Second Am. Compl. ¶¶ 141–50; H&M’s Br. in Opp’n to. Savant's Partial Mot. for
Summ. J., at 29.
118
H&M’s Br. in Opp’n to Savant's Partial Mot. for Summ. J., at 29.
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section provides two options for H&M to obtain compensation from Savant. The
first is in the form of a cash payment, requiring an invoice. The second is to offset
its compensation against future payments.119 Savant argues that H&M’s claim here
must fail because there are two condition precedents that Humanigen did not
satisfy.120 First, Savant alleges Humanigen never sent a valid invoice. And second,
Savant alleges Section 4.8 is only triggered if the Acquired Assets121 are insufficient
or inadequate.122
“The proper construction of any contract. . .is purely a question of law. . . .”123
The goal of contract interpretation “is to fulfill the parties’ expectations at the time
they contracted.”124 “But because Delaware adheres to an objective theory of
119
MDC § 4.8.
120
Savant’s Mot. for Partial Summ. J., at 21.
121
MDC § 2.1 (defining Acquired Assets).
122
Mots. Hr’g Tr., Mar. 18, 2021, at 24–25 (“[Savant’s counsel:] ‘Well, Section 4.8 does so
inferentially by its preparatory language which tells us that the expenditures have to be related to
the insufficiency or inadequacy of the assets. The plain language reading of that is that there has
to be at least a claim that that is so. In other words, it's not enough to say we spent $9.2 million
with overages of $3.8 million period. Because that's irrelevant under the terms of the MDC. What's
clear is you have to somehow relate that to the insufficiency or inadequacy of the assets. And that
simply didn't happen.’”).
123
Exelon Generation Acquisitions, LLC v. Deere & Co., 176 A.3d 1262, 1266–67 (Del. 2017)
(quoting Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del.
1992)).
124
Leaf Invenergy Co. v. Invenergy Renewables LLC, 210 A.3d 688, 696 (Del. 2019) (internal
quotation marks omitted).
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contracts,” the Court’s interpretation must be intelligible to an “objective, reasonable
third party.”125 To that end, the Court construes “clear and unambiguous terms
according to their ordinary meaning.”126 Ambiguity exists only if the disputed
language is “fairly or reasonably susceptible to more than one meaning.”127
Summary judgment cannot be granted if a disputed contract term is ambiguous.128
Savant’s first argument can’t command summary judgment because Savant
can’t point to MDC language defining “invoices and reasonable supporting
details.”129 Too, Savant’s claim that Section 4.8 wasn’t triggered by the insufficiency
or inadequacy of the Acquired Assets lacks support beyond its assertion.130
125
Id. (alteration and internal quotation marks omitted).
126
Id. (internal quotation marks omitted); see Salamone v. Gorman, 106 A.3d 354, 368 (Del.
2014) (“Contract terms themselves will be controlling when they establish the parties’ common
meaning so that a reasonable person in the position of either party would have no expectations
inconsistent with the contract language.” (internal quotation marks omitted)).
127
Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012).
128
See, e.g., GMG Cap. Invs., LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 783 (Del.
2012) (“This Court has long upheld awards of summary judgment in contract disputes where the
language at issue is clear and unambiguous. . . . But, where reasonable minds could differ as to the
contract’s meaning, a factual dispute results and the fact-finder must consider admissible extrinsic
evidence. In those cases, summary judgment is improper.” (citations omitted)).
129
Savant’s Reply Br., at 19 (D.I. 408) (citing MDC § 4.8).
130
Savant simply states that “the plain language of Section 4.8 demonstrates that Savant has no
liability to Plaintiff unless (1) the overages are due [because] of an insufficiency in the Benz Assets
(as opposed [to] Humanigen’s poor management)[.]” Then Savant exclusively argues its second
contention based on Section 4.8—that Humanigen didn’t provide an invoice with reasonable
supporting detail. Savant’s Mot. for Summ. J., at 23. In its response and reply briefs, Savant
continues exclusively arguing its second contention (lack of a proper invoice) and does not re-state
its first contention until the motions’ hearing. Mots. Hr’g Tr., March 18, 2021, at 24:22-25:12; see
also Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J.; Savant’s Reply Br.
- 27 -
Moreover, H&M’s response that the MDC does not explicitly state when an overage
is the result of an insufficiency or inadequacy of the Acquired Assets is left
unanswered by Savant.131 The Court can’t resolve “two equally reasonable, but
conflicting, interpretations” of contract language on summary judgment.132 In light
of H&M’s reasonable interpretation of the contractual language, and Savant’s failure
to effectively forfend H&M’s reasonable interpretation, summary judgment must be
DENIED.133
2. Breach of Contract – Failure to Cooperate in Investigation (Count V).
H&M alleges Savant violated MDC Sections 7.12 and 10.1 by not cooperating
in its investigation of the “apparent misappropriation of the Estani Data by Chemo
Research.”134 Savant claims that it had no duty to cooperate in an investigation
concerning Estani Data because Section 7.12 of the MDC requires such cooperation
only when Company IP is at issue; Estani Data, Savant maintains, was an Acquired
Asset, not Company IP.135
131
H&M’s Br. in Opp’n to Savant’s Mot. for Summ. J., at 19.
132
GMG Cap., 36 A.3d at 784.
133
Id. (“We reaffirm that, in a dispute over the proper interpretation of a contract, summary
judgment may not be awarded if the language is ambiguous and the moving party has failed to
offer uncontested evidence as to the proper interpretation.”).
134
H&M’s Second Am. Compl. ¶ 178.
135
Savant’s Mot. for Partial Summ. J., at 42.
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But Savant neglects to respond to the second part of H&M’s Count V claim—
breach of MDC Section 10.1.136 Specifically, H&M states that “[w]hen information
requests were made under Section 10.1 for materials, Savant rebuffed them.”137 In
addition to not addressing Section 10.1 in its Motion for Partial Summary Judgment,
Savant also fails to mention Section 10.1 in its Reply Brief.138
“[S]ummary judgment may not be granted under Rule 56 unless there are no
material issues of fact, and the moving party initially bears the burden of showing
that none are present.”139 Savant, though, presents no law or facts addressing the
latter part of H&M’s Count V claim, namely MDC Section 10.1.140 Accordingly,
Savant has failed to meet its initial burden, and its Motion for Summary Judgment
on this claim is therefore DENIED.
136
Id. at 41-44.
H&M’s Br. in Opp’n to Savant’s Mot. for Partial Summ. J., at 50 (citing H&M’s Mot. to
137
Compel the Produc. of Docs. (D.I. 39)).
138
Savant’s Reply Br., at 23.
139
Moore, 405 A.2d at 680.
140
H&M declares that “Humanigen does not intend to pursue an affirmative breach of Section
7.12 at trial. Rather, Humanigen limits its argument to the fact that both Section 7.5 and 7.12 limit
Savant’s ability to recover anything in New Jersey.” H&M’s Br. in Opp’n to Savant’s Mot. for
Partial Summ. J., at 50. As such, the Court expects this claim to be limited to Breach of MDC §
10.1.
- 29 -
3. Fraudulent Inducement – Representations Relating to Assets and
Contracts (Count VI).
Count VI alleges Savant “made false representations to [Humanigen]
concerning the status, quality and extent of testing and development required of the
Product as well [as] the adequacy of other Acquired Assets.”141 Here, H&M alleges
Humanigen relied on Savant’s misrepresentations and was induced into entering the
MDC because of these misrepresentations.142 In response, Savant claims that: (1) it
was not making guarantees or representations about the benznidazole assets; (2)
Humanigen acquired the Assets on an “as is, where is” basis; and (3) Humanigen
failed to conduct due diligence about the issues it raised in its claim.143 Additionally,
Savant suggests this claim should fail because H&M cannot prove scienter and the
claim is barred by an integration clause.144 Resolving this issue requires the Court
to determine (i) whether the MDC’s integration clause would bar H&M’s claim; and
(ii) whether there are no genuine issues of material fact from which H&M could
show scienter.
141
H&M’s Second Am. Compl. ¶ 181.
142
Id. ¶¶ 185–86.
143
Savant’s Mot. for Partial Summ. J., at 28-31; see also MDC § 9.9.
144
Savant’s Mot. for Partial Summ. J., at 37, 39.
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a. The MDC Does Not Bar Fraud Claims.
Delaware “abhors” fraud.145 But Delaware also promotes freedom of contract
“as a matter of fundamental public policy.”146 Allowing both to coexist, Delaware
law permits sophisticated contract parties to eliminate the risk of future claims of
fraud or misrepresentation “by contractually specifying what representations the
parties are and are not making and relying upon.”147 But, to preclude remedies for
so-called “extra-contractual” fraud—a fraud claim based on statements that are not
memorialized in the subject agreement—“the intent to preclude reliance on extra-
contractual statements must emerge clearly and unambiguously from the
contract.”148 Only if the contract’s terms, “when read together, can be said to add
up to a clear anti-reliance clause by which the [claimant] has contractually promised
145
E.g., Freeman v. Topkis, 40 A. 948, 949 (Del. Super. Ct. 1893) (“The law abhors fraud of
every nature and description, and will un-kennel and expose it whenever it can be found, no matter
how many or what may be the character of the disguises which surround it.”); ABRY Partners V,
L.P. v. F&W Acquisition LLC, 891 A.2d 1032, 1058 (Del. Ch. 2006) (“[T]his court consistently
has respected the law’s traditional abhorrence of fraud in implementing this reasoning.”).
146
NACCO Indus., Inc. v. Applica Inc., 997 A.2d 1, 29 (Del. Ch. 2009).
147
Infomedia Grp., Inc. v. Orange Health Sols., Inc., 2020 WL 4284087, at *4 (Del. Super. Ct.
July 31, 2020); see FdG Logistics LLC v. A&R Logistics Holdings, LLC, 131 A.3d 842, 858 n.48
(Del. Ch. 2016) (observing that parties may agree to “foreclose reliance” on un-memorialized
representations consistent with Delaware’s public policy against fraud and collecting authority),
aff’d, 2016 WL 5845786 (Del. Sept. 30, 2016); see also RAA Mgmt., LLC v. Savage Sports
Holdings, Inc., 45 A.3d 107, 117 (Del. 2012) (explaining the “extra-contractual” vs. contractual
fraud distinction and observing that the former may be disclaimed but the latter may not).
148
Kronenberg v. Katz, 872 A.2d 568, 593 (Del. Ch. 2004).
- 31 -
that it did not rely on statements outside the contract’s four corners” will a court bar
a fraud claim based on extra-contractual representations.149
As its sole textual support for an intent to disclaim the fraudulent inducement
count, Savant cites the MDC’s generic integration clause.
There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written,
between the Parties with respect to the subject matter of this Agreement
other than as are set forth in this Agreement, the other Transaction
Documents, and the surviving provisions of the Letter of Intent set forth
above.150
It is true that, when combined with other provisions, integration clauses have been
found one part of a larger component group that may together assemble valid anti-
reliance language.151 But it is well-established that “[a] standard integration clause,
without more, is insufficient to disclaim all reliance on extra-contractual
statements.”152 That is because an integration clause “simply operates to police the
variance of the agreement by parol evidence.”153 In only defining the agreement, an
149
Id.
150MDC § 15.13 (“Entire Agreement; Amendments”).
151
E.g., Prairie Cap. III, L.P. v. Double E Holding Corp., 132 A.3d 35, 51 (Del. Ch. 2015) (finding
an integration clause “combine[d]” with other disclaimer language to generate a valid anti-reliance
provision).
152
McDonald’s Corp. v. Easterbrook, 2021 WL 351967, at *6 (Del. Ch. Feb. 2, 2021); see also
Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 140 (Del. Ch. 2009) (“An anti-reliance
provision must be explicit, and a standard integration clause is not enough.”).
153
Kronenberg, 872 A.2d at 592.
- 32 -
integration clause does not amount to an “explicit and comprehensive” anti-reliance
provision through which the parties “forthrightly affirm that they are not relying
upon any representation or statement of fact not contained [in the contract].” 154 As
a result, § 5.13—which is unaccompanied by any additional evidence of anti-
reliance—doesn’t bar the fraudulent inducement claim.155
What is more, Savant doesn’t take the Court to the specific provisions that, in
conjunction with the MDC’s integration clause, would overcome the presumption
that all transaction-based fraud claims are viable.156 On that, Savant’s effort to use
MDC Section 9.9’s “as is, where is” language as a surrogate anti-reliance provision
misses the mark. That language falls woefully short of an explicit promise or
acknowledgement by H&M that it would not rely on extra-contractual statements
and thus would forfeit all its extra-contractual fraud claims.157
As a last resort, Savant cites Great Lakes Chemical Corp. v. Pharmacia Corp.
for the proposition that, because Savant and Humanigen are “two sophisticated
154
Anschutz Corp. v. Brown Robin Cap., LLC, 2020 WL 3096744, at *13 (Del. Ch. June 11,
2020) (alteration in original) (internal quotation marks omitted).
155
E.g., Black Horse Cap., LP v. Xstelos Holdings, Inc., 2014 WL 5025926, at *22 (Del. Ch. Sept.
30, 2014) (“The presence of a standard integration clause, alone, which does not contain explicit
anti-reliance representations and which is not accompanied by other contractual provisions
demonstrating with clarity that the plaintiff had agreed that it was not relying on facts outside the
contract, will not suffice to bar fraud claims.” (quoting Kronenberg, 872 A.2d at 593)).
156
Savant’s Mot. for Partial Summ. J., at 39.
157
E.g., Infomedia, 2020 WL 4384087, at *5–7 (analyzing applicable case law and explaining the
need for a promise or acknowledgement to complete the anti-reliance equation).
- 33 -
corporations” who executed a contract with negotiated terms, H&M is precluded
from bringing fraud claims.158 But there are at least four problems with this
reasoning.
First and most obviously, the claims in Great Lakes Chemical Corp. were
“explicitly precluded” by enforceable anti-reliance language.159 Here, as explained,
the MDC doesn’t explicitly preclude anything. Second, the question of whether a
contract contains valid anti-reliance language doesn’t hinge just on the parties’
identities. To be sure, level of sophistication is an important factor in determining
whether an agreement validly has disclaimed certain frauds.160 But ultimately, the
dispositive question is whether the agreement between those sophisticated parties
158
Savant’s Reply Br., at 17 (citing Great Lakes Chem. Corp. v. Pharmacia Corp., 788 A.2d 544,
556 (Del. Ch. 2001)).
159
See Great Lakes, 788 A.2d at 556 (“To allow Great Lakes to assert, under the rubric of fraud,
claims that are explicitly precluded by contract, would defeat the reasonable commercial
expectations of the contracting parties and eviscerate the utility of written contractual agreements.
For those reasons, I conclude that in these circumstances, Delaware law permits explicit contract
disclaimers to bar Great Lakes’ fraud claims. Because the parties’ contractually agreed-to
disclaimers extinguish the fraud claims being asserted here, Counts I and III will be dismissed.”).
160
E.g., ABRY, 891 A.2d at 1061–62 (cautioning in the anti-reliance context that “the common
law ought to be especially chary about relieving sophisticated business entities of the burden of
freely negotiated contracts”); but see Squid Soap, 984 A.2d at 140 (observing that “[s]ophisticated
parties frequently bargain for anti-reliance provisions” but then concluding more broadly that
“Delaware permits parties to disclaim reliance on representations outside of the written
agreement” (emphasis added)); but see also Stephen M. Haas, Contracting Around Fraud Under
Delaware Law, 10 DEL. L. REV. 49, 75–79 (2008) (identifying a “sophisticated party” requirement
in Delaware’s fraud jurisprudence and summarizing applicable case law, but also noting that “none
of [the Delaware] cases state just how ‘sophisticated a party must be’” and questioning case law
that protected “individuals” from fraud disclaimers while failing to measure the level of
sophistication that individuals—rather than entities—often possess).
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contains language that clearly amounts to a disclaimer of extra-contractual fraud
claims. The MDC, however, has no anti-reliance language. Third, Savant’s
“sophisticated party” refrain echoes both ways. If Savant—a sophisticated party—
wished for certain fraud to be barred, it could have drafted the agreement that way.
It didn’t. A sophisticated party cannot use litigation to extract contractual
protections it failed to negotiate at the bargaining table.161 And last, Savant
overlooks that, even with valid anti-reliance language, not all fraud claims can be
disclaimed. Anti-reliance and similar language is ineffective against knowingly
false representations that are memorialized in an agreement.162
Fraud claims aren’t barred by the MDC.
161
See W. Willow-Bay Ct., LLC v. Robino-Bay Ct. Plaza, LLC, 2007 WL 3317551, at *9 (Del.
Ch. Nov. 2, 2007) (“The presumption that the parties are bound by the language of the agreement
they negotiated applies with even greater force when the parties are sophisticated entities that have
engaged in arms-length negotiations.”), aff’d, 2009 WL 4154356 (Del. Nov. 24, 2009); see also
NAMA Holdings, LLC v. World Mkt. Ctr. Venture, LLC, 948 A.2d 411, 419 (Del. Ch. 2007)
(“Contractual interpretation operates under the assumption that the parties never include
superfluous verbiage in their agreement, and that each word should be given meaning and effect
by the court.”), aff’d, 2008 WL 571543 (Del. Mar. 4, 2008).
162
E.g., RAA, 45 A.3d at 117 (“[F]raud claims based on representations outside the agreement []
can be disclaimed through non-reliance language[, but] fraud claims based on ‘false
representation[s] of fact made within the agreement itself’ [] cannot be disclaimed.” (emphasis and
fourth alteration in original) (quoting ABRY, 891 A.2d at 1059)); see Squid Soap, 984 A.2d at 137–
38 (“Because of Delaware’s strong public policy against intentional fraud, a knowingly false
contractual representation can form the basis of a fraud claim, regardless of the degree to which
the agreement purports to disclaim tort remedies.”); Surf’s Up Legacy Partners, LLC v. Virgin
Fest, LLC, 2021 WL 117036, at *12 & n.143 (Del. Super. Ct. Jan. 13, 2021) (same and collecting
authority).
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b. Savant’s Scienter is a Fact Issue.
Under Delaware law, fraudulent inducement and common law fraud have the
same elements.163 Those elements are:
(i) a false representation, usually one of fact, made by the defendant;
(ii) the defendant’s knowledge or belief that the representation was
false, or was made with reckless indifference to the truth;
(iii) an intent to induce the plaintiff to act or refrain from acting;
(iv) the plaintiff’s action or inaction taken in justifiable reliance upon
the representation; and
(v) damage to the plaintiff as a result of such reliance.164
“Under Delaware law, scienter can be proven by establishing that the
defendant acted with knowledge of the falsity of a statement or with reckless
indifference to its truth.”165 Additionally, “[t]o prove scienter, a plaintiff need not
produce direct evidence of the defendant’s state of mind. [Instead, c]ircumstantial
evidence may often be the principal, if not the only, means of proving bad faith.”166
But, “when an ultimate fact to be determined is one of motive, intention or other
subjective matter, summary judgment is ordinarily inappropriate.”167 Here, the
163
Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 2018 WL 6311829,
at *31 (Del. Ch. Dec. 3, 2018).
164
Stephenson v. Capano Dev., Inc., 462 A.2d 1069, 1074 (Del. 1983) (formatting added).
165
In re Wayport, Inc. Litig., 76 A.3d 296, 326 (Del. Ch. 2013).
166
Deloitte LLP v. Flanagan, 2009 WL 5200657, at *8 (Del. Ch. Dec. 29, 2009) (internal
quotation marks and citation omitted).
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disputed record contains multiple facts on which a scienter argument could be
based.168 Accordingly, Savant’s scienter is a factual question that can’t be resolved
now.
In sum, the integration clause is not an absolute bar to the fraudulent
inducement claim. Issues of material fact exists as to what Humanigen knew or
should have known and to Savant’s scienter. And so, Savant’s Motion for Summary
Judgment on Count VI (Fraudulent Inducement) must be DENIED.
4. Fraudulent Inducement Concerning the License of Dr. Estani’s Data
(Count VII).
H&M alleges that Savant concealed material information concerning the Data
License Agreement and Dr. Estani’s desire to auction his data to the highest
bidder.169 Against this, Savant claims that Humanigen was made aware of and knew
about Dr. Estani’s susceptibility to financial incentives and that Chemo was
attempting to obtain Dr. Estani’s data.170 Specifically, Savant alleges Humanigen
167
LVI Grp. Invs., LLC v. NCM Grp. Holdings, LLC, 2019 WL 7369198, at *22 (Del. Ch. Dec.
31, 2019) (alteration and internal quotation marks omitted).
168
See H&M’s Br. in Opp’n to Savant’s Mot. for Partial Summ. J. Ex. 2 at 388–89 (Deposition
of Scott Freeman, M.D., Oct. 30, 2020); Id. at Ex. 17 at 21–23 (Deposition of Scott Freeman,
M.D., Nov. 16, 2020).
169
H&M’s Second Am. Compl. ¶ 184.
170
Savant’s Mot. for Partial Summ. J., at 33.
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learned Instituto de Efectividad Clínica y Sanitaria (“IECS”) was planning on
challenging the Data License Agreement months before the MDC was executed.171
The undergirding of Savant’s argument? It’s one March 7, 2016 email
propped up as confirmation that Humanigen knew or should have known about the
Estani Data exclusivity issue.172 Savant insists that Humanigen had the March 7,
2016 email in its possession, showing actual or constructive knowledge about Dr.
Estani and the data exclusivity issues.173 But Savant resolve on this erodes when it
tells the Court, “[t]he March 7[, 2016] email was likely in Humanigen’s possession
before the execution of the MDC.”174
So, Savant averred that Humanigen had this email in its possession, only to—
in almost the next breath—concede that it cannot confirm whether the email was
actually in Humanigen’s possession.175 This inconsistency alone demonstrates that
there are facts in dispute, rendering summary judgment inappropriate. Accordingly,
Savant’s Motion for Summary Judgment on Count VII (Fraudulent Inducement) is
DENIED.
171
Id. at 34.
172
Id. at 4–5.
173
Id. at 4.
174
Id. at 10 (emphasis added).
175
Id. at 4, 10.
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E. SAVANT’S PARTIAL SUMMARY JUDGEMENT MOTION ON ITS BANKRUPTCY
PROCEEDING COUNTERCLAIMS: BREACH OF CONTRACT – SECTION 3.3(A) OF
THE MDC – FIRST AND SECOND MILESTONE PAYMENTS (COUNTS I AND II).
According to Savant, H&M is not entitled to offset its milestone payments
and, even if H&M could prove it is entitled to offset the milestone payments, that’s
a question for trial.176 But then, quizzically, Savant says that regardless of how the
Court would rule on that offset question, Savant is entitled to its payment now.177
As support for this, Savant cites to Fleet National Group., Inc. v. Advanta
Corp., arguing a future offset does not bar the awarding of the sum a party is
otherwise entitled to receive.178 But, in Fleet National, the Court of Chancery found
the party “made no serious effort to support that offset claim.”179 While here, H&M
has raised a factual issue about how the contract should be interpreted. And here,
the underlying claim shares the same factual issues as Savant’s Count VI180 (Breach
of Contract) and H&M’s Count I181 (Breach of MDC Section 4.8). As to both of
176
Savant’s Mot. for Partial Summ. J., at 45.
177
Id.
1782001 WL 1333405, at *14 (Del. Ch. Oct. 15, 2001).
179
Id.
180In its Opposition Brief to H&M’s Motion for Summary Judgment, Savant narrows Count VI,
making “[t]he basis for the claim . . . identical to Count 3.” Savant’s Br. in Opp’n to H&M’s Mot.
for Summ. J., at 45–46.
181
Savant opposed H&M’s Count I claim arguing that because Humanigen did not provide it with
an invoice containing “reasonable supporting details[,]” Savant could not adequately choose
between its two potential options for receiving compensation, and thus Humanigen allegedly
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those, the Court has found that a factual issue exists concerning whether milestone
payments can be offset and denied summary judgement. So, summary judgment on
Savant’s Counterclaims I and II must likewise be DENIED.
IV. CONCLUSION
As a final tally of the disposition of the parties’ several motions:
• Savant’s Motion for Summary Judgment as to Counts I (Breach), Count V
(Breach), Count VI (Fraudulent Inducement), and Count VII (Fraudulent
Inducement) of H&M’s Second Amended Complaint are DENIED;
• Savant’s Motion for Summary Judgment as to Counterclaims I (Breach)
and II (Breach) of Savant’s Bankruptcy Counterclaims are DENIED;
• Humanigen’s Motion for Summary Judgment as to Count II (Declaratory
Breach) of Savant’s Second Amended Complaint is DENIED as moot and
the claim is DISMISSED.
• Humanigen’s Motion for Summary Judgment as to Count IV (Fraudulent
Transfer) of Savant’s Second Amended Complaint is DENIED.
• Humanigen’s Motion for Summary Judgment as to Count VI (Breach) of
Savant’s Second Amended Complaint is GRANTED.
• H&M’s Motion for Summary Judgment as to Counterclaims I through VI
of Savant’s Bankruptcy Counterclaims are DENIED.
• Nomis Bay’s Motion for Summary Judgment as to Count IV (fraudulent
transfer) of Savant’s Second Amended Complaint is GRANTED.
IT IS SO ORDERED.
_________________________
Paul R. Wallace, Judge
breached MDC § 4.8. Savant’s Reply Br., at 19 (citing MDC § 4.8); Savant’s Br. in Opp’n to
H&M’s Mot. for Summ. J., at 30.
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