Humanigen, Inc. v. Savant Neglected Diseases, LLC

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
Corrected: July 12, 2021
Withdrawn and Reissued With Clarifications: September 23, 2021
Upon Savant Neglected Diseases, LLC’s Motion for Summary Judgment,
DENIED.
Upon Humanigen, Inc. 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
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.
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 (“Madison” and together with
Humanigen, “H&M”)—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
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).
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removed to the United States District Court for the District of Delaware,6 but then,
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
Courts’ cases.
On July 9, 2021, the Court issued a memorandum opinion and order (the
“Opinion”)11 that resolved the parties’ then-pending summary judgment motions.
Culling a barrage of contract and fraud claims, as well as certain procedural and
prudential issues those claims involved, the Opinion denied Savant’s motion,
granted in part and denied in part H&M’s motion, and granted Nomis Bay’s motion.
6
Notice of Filing Notice of Removal (D.I. 5).
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 later issued a revised iteration of the Opinion that corrected technical errors in the
original. (D.I. 424).
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H&M and Savant requested reargument under Rule 59(e) a few days later.12
For their part, H&M observe the Opinion did not fully address its motion against
one of Savant’s counterclaims. Savant, on the other hand, asserts the Opinion
misconstrued the scope of its concessions in finding Savant abandoned two of its
counts entirely. Each motion has been opposed.13
H&M and Savant’s contentions, when reduced, challenge the Opinion’s
completeness, and so the Court treats their Rule 59(e) motions as ones for
clarification rather than reargument.14 Clarification is appropriate relief from an
imprecise judgment.15 Clarification, however, is not an appropriate a vehicle for
raising new arguments.16 No matter how labeled, a party cannot use a Rule 59(e)
motion to rehash unsuccessful arguments that have been preserved for, and are
12
Pls.’ & Def.’s Mots. for Rearg. (D.I. 425–26); see generally Del. Super. Ct. Civ. R. 59(e).
13
Def.’s Opp’n. to Pls.’ Mot. for Rearg. (D.I. 427); Pls.’ Opp’n. to Def.’s Mot. for Rearg. (D.I.
428).
14
Cf. State ex rel. French v. Card Compliant, LLC, 2018 WL 4183714, at *4 (Del. Super. Ct.
Apr. 30, 2018) (“Procedurally, a motion for clarification is treated as a motion for reargument.”).
15
E.g., GXP Cap., LLC v. Argonaut Mfg. Servs., Inc., 234 A.3d 1186, 1191 & n.1 (Del. Super.
Ct. 2020), aff’d, 253 A.3d 93 (Del. 2021) (observing the same and collecting authority).
16
E.g., New Castle Cnty. v. Pike Creek Recreational Servs., LLC, 2013 WL 6904387, at *2 (Del.
Super. Ct. Dec. 30, 2013) (In considering a Rule 59(e) motion, “[t]he Court’s review is limited to
consideration of the record, meaning the Court may not consider issues raised for the first time . .
. .” (internal quotation marks and citation omitted)).
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naturally amendable to, direct appeal.17
Having reviewed the motions, the Court concludes clarification is warranted.
Accordingly, the Court withdraws the Opinion, and replaces it with this decision.18
I. FACTUAL BACKGROUND19
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.20 Humanigen sued
Savant in this Court, and Madison sued Chemo Research in the New Jersey federal
17
See Allen v. Scott, 2021 WL 3136705, at *7 (Del. July 26, 2021) (“To be preserved on appeal,
. . . a question [must] be fairly presented to the trial court. To be fairly presented[,] an issue already
raised in the trial court need not be re-asserted in a Motion for Reargument. To the contrary, a
Motion for Reargument should not be a vehicle for one party who was unhappy with the Court’s
ruling to simply rehash the arguments already heard and decided by the Court.” (internal quotation
marks and citation omitted)); see also In re Oxbow Carbon LLC, 2017 WL 1191903, at *2 (Del.
Ch. Mar. 30, 2017) (rejecting as an attempted “do-over” a motion for clarification where
challenged ruling otherwise was “clear and unambiguous”).
18
In the interest of efficiency, and continuity of review, the Court has elected to retain as
originally written the Opinion’s unchallenged parts, including its factual recitations. See, e.g.,
Gore v. Al Jazeera Am. Holdings I, Inc., 2015 WL 721068, at *1 (Del. Ch. Feb. 19, 2015) (leaving
a prior ruling intact save the “portion” that required clarification). As a result, the Court clarifies
“via integration with its original” language this decision on the claims highlighted by the instant
motions. Card Compliant, 2018 WL 4183714, at *4.
19
The Court directs readers to its August 2020 opinion and order for supplemental background
information and procedural history. See generally Humanigen, 238 A.3d 194. In turn, the Court
assumes the parties’ familiarity with the facts involved in this case, including those not explicitly
recounted herein.
20
E.g., H&M’s Second Am. Compl. ¶¶ 5, 14.
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district court (the “New Jersey Suit”).21 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.22 Savant also
alleges that Humanigen withheld this information and abandoned its work on
benznidazole, deciding to pursue litigation instead.23
Nomis Bay and Humanigen created and organized Madison in February
2018.24 Nomis Bay and Humanigen are the sole members of Madison, owning 70
percent and 30 percent respectively.25 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.26
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
21
See generally Compl., Madison Joint Venture LLC v. Chemo Research S.L., 2:19-cv-08012
(D.N.J. Mar. 7, 2019).
22
Savant’s First Am. Compl. ¶¶ 59–62, Aug. 27, 2019 (Del. Ch. D.I. 11).
23
Id.
24See 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)).
25
Madison Operating Agreement Ex. A.
26
Madison Operating Agreement Ex. B at 1–2.
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lack of standing.27 Now, three summary judgment motions pend before the Court:
one from Humanigen28 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.29 Nomis Bay moves for
summary judgment against Savant’s fraudulent transfer claim.30 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.31 All are now ripe for decision.
II. STANDARD OF REVIEW
“Summary judgment is appropriate where the record demonstrates that ‘there
is no genuine issue as to any material fact and that the moving party is entitled to
27
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.).
28
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.
29
H&M’s Mot. for Summ. J., at 1 (D.I. 377).
30
Nomis Bay’s Mot. for Summ. J., at 25 (D.I. 378).
31
Savant’s Mot. for Partial Summ. J., at 4 (D.I. 379).
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judgment as a matter of law.’”32 “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.’”33 The movant bears the
initial burden of demonstrating its motion is supported by undisputed material
facts.34 If that burden is met, then the non-movant must demonstrate that there is a
“genuine issue for trial.”35 And to determine whether there is a genuine issue, the
Court construes the record in the light most favorable to the non-movant.36
This framework “is not altered” by the presence of cross-motions for summary
judgment.37 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
32
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.”).
33
Unbound Partners Ltd. P’ship v. Invoy Holdings Inc., 251 A.3d 1016, 1023 (Del. Super. Ct.
2021) (alteration in original) (quoting Ebersole v. Lowengrub, 180 A.2d 467, 468–69 (Del. 1962)).
34
Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979).
35
Del. Super. Ct. Civ. R. 56(e).
36
Judah v. Del. Tr. Co., 378 A.2d 624, 632 (Del. 1977).
37
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.”38 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.”39 “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.”40 In determining whether
material facts are in dispute, the Court evaluates each motion separately.41 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.42 For though “summary judgment is encouraged when possible, there is no
38
Del. Super. Ct. Civ. R. 56(h).
39
United Vanguard Fund, Inc. v. TakeCare, Inc., 693 A.2d 1076, 1079 (Del. 1997).
40
Fasciana v. Elec. Data Sys. Corp., 829 A.2d 160, 166 (Del. Ch. 2003).
41
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.”).
42
Unbound Partners, 251 A.3d at 1024 (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.”43
III. DISCUSSION
A. H&M’S SUMMARY JUDGMENT MOTION TARGETING SAVANT’S
SECOND AMENDED COMPLAINT.
1. Declaratory Judgment that the Rights to Benznidazole IP and
Related Claims Have Reverted to Savant (Count I).
a. Savant Abandoned Count I.
Through Count I, Savant sought declaratory judgments grounded on various
contractual provisions that, either individually or at an unspecified critical mass,
allegedly prevent H&M from stopping its benznidazole development efforts and
from transferring benznidazole property rights to certain third parties.44 The Opinion
did not consider H&M’s motion against Count I because the Opinion found Savant
forfeited Count I in its entirety.45 On that finding Savant seeks reconsideration.
In finding Savant forfeited Count I in its entirety, the Opinion relied on a
concession Savant made in its opposition brief. In a footnote, Savant had said:
To streamline it[s] case for trial, 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 6.46
43
AeroGlobal Cap. Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 443 (Del. 2005).
44
Savant’s Second Am. Compl. ¶¶ 88–97 (D.I. 302).
45
Memo. Op. & Order, July 12, 2021, at 4 n.23, 7 n.36 (corrected opinion) (D.I. 424).
46
Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J., at 19 n.6 (D.I. 393) (emphasis added).
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“Voluntary and knowing concessions of fact,” like these, “are traditionally
considered conclusive and binding upon the party against whom they operate, and
upon the court.”47 Given that a party’s factual admissions are binding on the tribunal
in which they are made and on the party who made them, the Court was constrained
to accept Savant’s concession. Indeed, Savant now acknowledges its footnote could
have been interpreted to forfeit Count I in toto.48 Savant, by consequence, is
estopped from changing course through a motion for reargument. 49
Undeterred, Savant insists the footnote jettisoned only four of the seven
“theories” comprising Count I, not the whole thing.50 But Savant did not identify in
47
Merritt v. United Parcel Serv., 956 A.2d 1196, 1201–02 (Del. 2008) (emphasis added); cf.
AT&T Corp. v. Lillis, 953 A.2d 241, 257 (Del. 2008) (holding that legal conclusions, as opposed
to factual admissions, are non-binding and may be retracted by the party or ignored by the court).
48
See Savant’s Mot. for Rearg. at 2 (“In hindsight, this footnote could have been written more
clearly to indicate that Savant was” not dropping Count I in its entirety.)
49
AT&T, 953 A.2d at 257; see Motorola Inc. v. Amkor Tech., Inc., 958 A.2d 852, 859 (Del. 2008)
(“[J]udicial estoppel . . . prevents a litigant from advancing an argument that contradicts a position
previously taken that the court was persuaded to accept as a basis for its ruling.”).
50
As support for this position, Savant calculates the “percentage” of pages H&M devoted to
moving against Count I and an excerpted colloquy from oral argument in which counsel appeared
to believe Count I was still in the case. Savant’s Mot. for Rearg. at 2–3. The Court, however, is
not bound by counsel’s view of the law or the litigation strategies a party deploys. See Levinson
v. Del. Comp. Rating Bureau, Inc., 616 A.2d 1182, 1186 (Del. 1992) (“[W]hen counsel speaks of
legal principles . . . he makes no judicial admission . . . [that] would prevent the court from
applying to the facts . . . the proper legal principles . . . .” (third and fourth ellipses added) (internal
quotation marks omitted)); see also Blinder, Robinson & Co., Inc. v. Bruton, 552 A.2d 466, 473
(Del. 1989) (“Judicial admissions [that] are binding on the tendering party are limited to factual
matters in issue and not to statements of legal theories or conceptions.”).
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the footnote the exact theories it did not intend to drop. Perhaps it couldn’t. Even
now, Savant seems unfamiliar with its own allegations; it seeks reconsideration of
theories that are not present in Count I.51
Aside from contradicting the footnote, Savant’s multi-theory approach to
pleading claims suffers a systemic issue. Rather than pleading all its breach-of-
contract and declaratory allegations separately as individual claims that could be
discerned and examined properly, Savant stuffed thinly differentiated breach-of-
contract and declaratory “theories” into two counts branded with underinclusive
headings that do not accurately preview what a reader will find inside. Pleading
multiple theories within one count, as Savant has done, can cause procedural
problems, not the least of which being incomplete judgments.52
No matter how many related theories underpin it, the wrong alleged and its
underlying theories are procedurally one claim.53 And it would seem only far to
51
Compare Savant’s Mot. for Rearg. at 4 (citing MDC “Section 7.5” and “the implied covenant”
as theories in Count I), with Savant’s Second Am. Compl. ¶¶ 88–97, 114 (D.I. 302) (listing neither
in Count I but noting the implied covenant in Count III). Indeed, Section 4.5 is not referenced in
the complaint at all.
52
See Intermec IP Corp. v. TransCore, LP, 2021 WL 3620435, at *24 n.214 (Del. Super. Ct.
Aug. 16, 2021) (noting that “sub-theories” pleaded within single counts are “easy to miss” and
suggesting that claimants who take a multi-theory pleading approach proceed at their own peril).
53
See, e.g., Sojka v. Bovis Lend Lease, Inc., 686 F.3d 394, 399 (7th Cir. 2012) (“A claim is the
aggregate of operative facts [that] give rise to a right enforceable in the courts. One claim
supported by multiple theories does not somehow become multiple claims.” (internal quotation
marks and citation omitted)); see also 10 WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE
§ 2657 (4th ed. 2021).
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require far greater precision by a claimant both in its initial pleading and any
subsequent abandonment.54 Indeed, given the unitary claim model our procedural
law has established, a claimant cannot “strike” isolated theories within its own
claims without, at least, moving for an appropriate amendment.55 Savant didn’t.
Rather, it said it was dropping the claim in whole only to try to walk that back later.
In short, Savant’s decision to strike by opposition brief unidentified theories
within Count I also sacrificed Count I entirely. As a result, H&M’s motion against
Count I is GRANTED.
b. Even if Not Abandoned, Count I Wouldn’t Survive Summary Judgment.
To reiterate, Count I fails in its entirety because either Savant intended to
forfeit it or procedural law, under these circumstances, operated to the same end.
Nonetheless, the Court concludes for completeness Count I would fail on the merits.
In doing so, the Court limits itself to the theories Savant has identified as remaining:
breach of MDC Sections 4, 5.4, 7.5, and 13.3, and breach of an implied covenant.56
54
See Intermec, 2021 WL 3620435, at *24 n.214 (“If a defendant must attack whole counts, a
defendant should have whole counts to attack.”); Int’l Bus. Machs. Corp. v. Priceline Grp. Inc.,
2017 WL 1349175, at *6–7 (D. Del. Apr. 10, 2017) (substantially the same).
55
See inVentiv Health Clinical, LLC v. Odonate Therapeutics, Inc., 2021 WL 252823, at *5 (Del.
Super. Ct. Jan. 26, 2021). Requiring amendments through Rule 15 motions or equivalents is one
solution, but, no doubt, there are others. Delaware courts have discretion to manage their dockets
and may decide for themselves what paradigm best promotes resource conservation, efficient
outcomes, and similar advantages. E.g., Unbound Partners, 251 A.3d at 1030–31.
56
Savant’s Mot. for Rearg. at 4.
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As an initial matter, Section 7.5 and an implied covenant are not alleged in
Count I. Briefs do not amend pleadings.57 As a result, the Court will not consider
these. Similarly, Savant’s reading of Section 5.4 will be discussed—and rejected—
below.58 So the Court need not consider it here anymore.
That leaves Sections 4 and 13.3. Neither survives. Section 13.3 allows—but
does not require—the MDC’s parties to terminate the contract if one party breaches
materially.59 As this provision confers a right, not a duty, Savant has failed to show
an express obligation requiring a party to exercise its discretion to terminate.60
Finally, Section 4 outlines the parties’ drug development program. Using
Section 4, Savant contends Humanigen breached by stopping its development
efforts. Savant’s arguments therefore turn on Section 4’s “Diligent Efforts”
provision.61 Under the MDC, Diligent Efforts are defined, in relevant part, as “the
performance of obligations . . . consistent with the efforts a [p]arty devotes (and
57
E.g., Lima USA, Inc. v. Mahfouz, 2021 WL 3877969, at *12 (Del. Super. Ct. Aug. 31, 2021);
Intermec, 2021 WL 3620435, at *24 n.214, *25 n.231; GWO Litig. Tr. v. Sprint Sols., Inc., 2018
WL 5309477, at *17 n.177 (Del. Super. Ct. Oct. 25, 2018).
58
See infra III.A.4.b.
59
MDC § 13.3 (“Either Party . . . may . . . terminate this Agreement in the event the other Party
. . . materially breached or defaulted . . . .”).
60
E.g., VLIW Tech., Inc. v. Hewlett–Packard Co., 840 A.2d 606, 612 (Del. 2003) (stating breach
of an obligation as a required element of a breach-of-contract claim).
61
MDC § 4.4; see also id. § 5.3.
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which in no event shall be less than the level of effort and resources . . . in the
biopharmaceutical industry) for the [e]xploitation of a product . . . that is at a similar
stage in its development . . . , in each case based on the conditions then prevailing.”62
Summary judgment is appropriate here. First, as H&M press, Savant has not
discovered material evidence suggesting H&M did not exercise Diligent Efforts or
that the Efforts they did exercise fell below what a comparable entity in the
biopharmaceutical industry would have done under the “conditions then
prevailing”—i.e., a competitor’s misappropriation and subsequent monopolization
of the very data the parties had been developing.
And second, Savant has not offered a reasonable interpretation of the MDC’s
force majeure clause, which by its plain terms,63 applies to a situation like this where
a party is precluded from performance because a third party controls by government
authorization the means of developing what the parties planned to commercialize.64
62
Id. § 1.
63
See, e.g. Exelon Generation Acquisitions, LLC v. Deere & Co., 176 A.3d 1262, 1273 (Del.
2017) (reversing lower court for considering extrinsic evidence of meaning of “unambiguous”
force majeure clause); Stroud v. Forest Gate Dev. Corp., 2004 WL 1087373, at *5 (Del. Ch. May
5, 2004) (“Application of a force majeure provision, as with any other contractual provision, starts
with the words chosen by the drafters.”).
64
See id. § 15.1 (listing, among other categories that could apply to the FDA, “regulation[s]” and
“requirement[s] of any government” as circumstances excusing default). Savant unsuccessfully
cites a case governed by New York law for the proposition that a force majeure clause, to be
applicable, must spell out the exact event alleged to have prevented performance. See United
States v. Panhandle E. Corp., 693 F. Supp. 88, 96 (D. Del. 1988). That, of course, is not Delaware
law. See, e.g., ev3, Inc. v. Lesh, 114 A.3d 527, 529 n.3 (Del. 2014) (“Delaware law respects the
freedom of parties to strike bargains and honors and enforces those bargains as plainly written.”
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Savant could have limited the scope of the force majeure clause to exclude FDA-
related hardships or to include only unforeseeable events.65 It didn’t. Yet, “[t]he
proper way to allocate risks in a contract is through the bargaining process. It is not
the court’s role to rewrite the contract between sophisticated market participants,
allocating the risk of an agreement after the fact . . . .”66
To blunt the application of contract language it drafted, Savant points out that
the force majeure provision contains a “reasonable efforts” qualifier that prevents
H&M from claiming an excuse unless they work to mitigate the excusing event’s
impact.67 True—but Savant has not rebutted H&M’s claim that Madison’s pursuit
of Chemo in the New Jersey Action is a reasonable effort to override the FDA’s
grant and to resume performance. Because Savant has not met its burden to the
(internal quotation marks omitted)); Active Asset Recovery, Inc. v. Real Est. Asset Recovery Servs.,
Inc., 1999 WL 743479, at *11 (Del. Ch. Sept. 10, 1999) (finding that omission of a specific term
in a contract “speaks volumes” about the parties’ intent when construing included terms (citing 3
Corbin on Contracts § 552 (1960))); see also Fortis Advisors LLC v. Shire US Holdings, Inc., 2017
WL 3420751, at *8 (Del. Ch. Aug. 9, 2017) (analogizing counterparties’ omission of specific terms
to the statutory canon of expresio unius est exclusio alterius, which provides that an omission
presumptively is intentional when other terms are included instead); DeLucca v. KKAT Mgmt.,
L.L.C., 2006 WL 224058, at *2 (Del. Ch. Jan. 23, 2006) (“[I]t is not the job of a [Delaware] court
to relieve sophisticated parties of the burdens of contracts they wish they had drafted differently
but in fact did not.”).
65
See, e.g., Akorn, Inc. v. Fresenius Kabi AG, 2018 WL 4719347, at *60–61 (Del. Ch. Oct. 1,
2018); W. Willow–Bay Ct., LLC v. Robino–Bay Ct. Plaza, LLC, 2007 WL 3317551, at *11 (Del.
Ch. Nov. 2, 2007).
66
Wal–Mart Stores, Inc. v. AIG Life Ins. Co., 872 A.2d 611, 624 (Del. Ch. 2005), rev’d in part
on other grounds, 901 A.2d 106 (Del. 2006).
67
MDC § 15.1.
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contrary, H&M’s summary judgment must be GRANTED against Savant on this
ground and the other theories.68
2. 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.69 H&M contends that the claim is “unripe, precluded
by contract, and has been waived.”70
The Court’s power to issue a declaratory judgment derives from the Delaware
Declaratory Judgment Act.71 A declaratory judgment “is designed to promote
preventative justice.”72 It is “[b]orn out of practical concerns,”73 enabling a court to
decide a controversy “prior to the time when a remedy is traditionally available” by
catalyzing the matter to justiciability.74 “Not all disputes, however, are appropriate
68
Moore, 405 A.2d at 680 (explaining summary judgment burden shifting); see Brzoska, 668
A.2d at 1364 (“If the facts permit reasonable persons to draw but one inference, the question is
ripe for summary judgment.”).
69
Savant’s Second Am. Compl. ¶¶ 98–106 (D.I. 302).
70
H&M’s Br. in Opp’n to Savant's Partial Mot. for Summ. J., at 32.
71
See generally DEL. CODE ANN. tit. 10, § 6501 (2020).
72
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)).
73
Id. at 1238.
74
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.”75 A declaratory judgment request
presupposes a still-evolving controversy, imposing jurisdictional limitations.76 A
court cannot accelerate an embryonic matter to a stage traditionally justiciable if
doing so would produce an advisory opinion along the way.77 Stated prudentially, a
court cannot issue a declaratory judgment unless the matter is sufficiently ripe.78 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.”79 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.80 “A case is ripe for judicial review when the dispute has
75
Town of Cheswold v. Cent. Del. Bus. Park, 188 A.3d 810, 816 (Del. 2018).
76
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.”).
77
Stroud v. Milliken Enters., Inc., 552 A.2d 476, 479 (Del. 1989).
78
Rollins Int’l, Inc. v. Int’l Hyrdonics Corp., 303 A.2d 660, 662–63 (Del. 1973).
79
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)).
80
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.”81 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.”82 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.”83 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.’”84
As an initial matter, Savant contends elliptically that the Court’s prior opinion
“implicitly rejected” a ripeness challenge.85 But the Court did no such thing. And
even if it did, subject matter jurisdiction can be raised at any time, 86 despite not
81
Town of Cheswold, 188 A.3d at 816.
82
XL Specialty, 93 A.3d at 1217.
83
Id. at 1217–18 (internal quotation marks and citation omitted).
84
Goldenberg v. Immunomedics, Inc., 2021 WL 1529806, at *19 (Del. Ch. Apr. 19, 2021)
(quoting Schick, 533 A.2d at 1239).
85
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).”).
86
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)).
-18-
having been recognized as a problem before.87 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[.]”88 But, as
H&M notes, resolution of the New Jersey Suit “is years away” and the associated
recovery and jury award are speculative.89 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.90 to imply that a court can provide an advisory
opinion when deciding a declaratory judgment claim.91
87
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).
88
Savant’s Second Am. Compl. ¶ 106.
89
H&M’s Br. in Opp’n to. Savant's Partial Mot. for Summ. J., at 33.
90
303 A.2d 660 (Del. 1973).
91
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.92
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.
3. Breach of Contract Against Humanigen (Count III).
Count III seeks as a counterpart breach-of-contract damages for the
wrongdoing alleged in Count I. As explained, however, Count III was abandoned
in the same footnote as Count I. The procedural analyses applicable on
reconsideration, therefore, are equally applicable here. Still, for completeness, the
Court GRANTS Humanigen summary judgment on the merits.
In moving for reargument, Savant identifies two theories that should preclude
summary judgment: the prevention doctrine and the implied covenant. The Court
will review—and reject—Savant’s prevention doctrine argument later.93 But it
rejects Savant’s implied covenant now.
92
Rollins, 303 A.2d at 662.
93
See infra III.A.4.a.
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To state a claim for breach of the implied covenant, a claimant must allege:
“(1) a specific implied contractual obligation; (2) a breach of that obligation; and (3)
resulting damage.”94 The implied covenant of good faith and fair dealing inheres in
all contracts and exists to fill unanticipated gaps in a contract’s express terms.95 It
“preserve[s] the economic expectations of the parties” by “ensur[ing] that the parties
deal honestly and fairly with each other when addressing” unexpected contractual
developments.96 Put differently, the implied covenant prevents a contracting party
from acting “arbitrarily and unreasonably, thereby frustrating the fruits of the
bargain that the asserting party reasonably expected.”97
But, as a matter of black-letter law, the implied covenant “cannot be used to
vary a contract’s express terms.”98 “[E]xpress contractual provisions ‘always
supersede’ the implied covenant,” and so a party invoking the implied covenant must
94
KT4 Partners LLC v. Palantir Techs. Inc., 2021 WL 2823567, at *26 (Del. Super. Ct. June 24,
2021) (internal quotation marks omitted).
95
Dieckman v. Regency GP LP, 155 A.3d 358, 367 (Del. 2017).
96
Glaxo Grp. Ltd. v. DRIT LP, 248 A.3d 911, 919 (Del. 2021) (citation omitted).
97
Nemec v. Shrader, 991 A.2d 1120, 1126 (Del. 2010).
98
Buck v. Viking Holding Mgmt. Co. LLC, 2021 WL 673459, at *5 (Del. Super. Ct. Feb. 22,
2021); see Nemec, 991 A.2d at 1125–26 (“[O]ne generally cannot base a claim for breach of the
implied covenant on conduct authorized by the agreement.” (alteration in original) (quoting
Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434, 441 (Del. 2005))).
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plead a “gap” for which the covenant might supply a term.99 Savant, though, has not
pleaded a gap. Instead, Savant claims Humanigen concealed Chemo’s attempts to
obtain FDA approval, ceasing performance and selling assets rightfully belonging
to Savant along the way.100 The MDC, however, governs those through the Diligent
Efforts and asset sale and transfer provisions. As a result, Savant’s implied covenant
claim is a duplicative breach claim and fails as a matter of law.101
Contrary to Savant’s contentions, the implied covenant’s “good faith”
component “does not envision loyalty to [a] contractual counterparty.”102 Despite
its name, “the covenant does not establish a free-floating requirement that a party
99
Bandera Master Fund LP v. Boardwalk Pipeline Partners, LP, 2019 WL 4927053, at *22 (Del.
Ch. Oct. 7, 2019) (quoting Gerber v. Enter. Prods. Holdings, LLC, 67 A.3d 400, 419 (Del. 2013),
overruled in part on other grounds by Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 815 n.13 (Del.
2013)).
100
Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J., at 39–40 (D.I. 393).
101
E.g., Edinburgh Holdings, Inc. v. Educ. Affiliates, Inc., 2018 WL 2727542, at *9 (Del. Ch.
June 6, 2018) (“The implied covenant . . . cannot be invoked to override the express terms of a
contract. Thus, if the contract at issue expressly addresses a particular matter, an implied covenant
claim respecting that matter is duplicative and not viable.” (internal quotation marks and citations
omitted)); accord Buck, 2021 WL 673459, at *5 (dismissing an implied covenant claim that
“merely repackage[d]” a breach-of-contract claim); see also Murfey v. WHC Ventures, LLC, 236
A.3d 337, 350 (Del. 2020) (“Implying a term that the parties did not expressly include risks
upsetting the economic balance of rights and obligations that the contracting parties bargained for
in their agreement.”); Oxbow Carbon & Mins. Holdings, Inc. v. Crestview–Oxbow Acquisition,
LLC, 202 A.3d 482, 507 (Del. 2019) (“Delaware’s implied duty of good faith and fair dealing is
not an equitable remedy for rebalancing economic interests after events that could have been
anticipated, but were not, that later adversely affected one party to the contract. Rather, the implied
covenant is an extraordinary legal remedy.” (internal quotation marks and citations omitted));
102
Gerber, 67 A.3d at 419 (emphasis and internal quotation marks omitted).
-22-
act in some morally commendable sense.”103 And it does not “necessarily require
that a party have acted in subjective good faith.”104 Instead, it exists to deter arbitrary
or unreasonable conduct that would spoil the fruits of a bargain.105 Savant, however,
unsuccessfully cites bad-faith conduct alone to bolster its covenant.106 Yet, a bad
faith breach of the agreement’s express terms is still a breach of the agreement’s
express terms.107
There is no implied covenant in the MDC.
4. 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
Allen v. El Paso Pipeline GP Co., L.L.C., 113 A.3d 167, 182–83 (Del. Ch. 2014), aff’d, 2015
103
WL 803053 (Del. Feb. 26, 2015).
104
Id. at 183.
105
Dieckman, 155 A.3d at 367.
106
See Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872, 888 (Del. Ch. 2009) (“The implied
covenant cannot be invoked to override the express terms of the contract. . . . General allegations
of bad faith conduct are not sufficient. Rather, the plaintiff must allege a specific implied
contractual obligation and allege how the violation of that obligation denied the plaintiff the fruits
of the contract. Consistent with its narrow purpose, the implied covenant is only rarely invoked
successfully.” (emphasis added) (citations omitted)).
107
See ASB Allegiance Real Est. Fund v. Scion Breckenridge Managing Member, LLC, 50 A.3d
434, 444–45 (Del. Ch. 2012) (“Notwithstanding the covenant’s potentially misleading moniker
and decisional references to a culpable mental state, a claim for breach of the implied covenant is
a contract claim, requires proof of breach-of-contract elements, and yields contract remedies.”),
rev’d on other grounds, 68 A.3d 665 (Del. 2013).
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creditor of the debtor[.]”108 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).”109 Rule 9(b)
requires particularized pleading of the circumstances surrounding the alleged fraud
and generalized pleading of the alleged fraudster’s knowledge.110 Accordingly, to
state a fraudulent transfer claim, a plaintiff “must generally plead facts showing
intent to defraud with specific supporting facts describing the circumstances of the
transfer.”111
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.112 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.113 It has.
108
DEL. CODE ANN. tit. 6, § 1304(b) (cross-referencing DEL. CODE ANN. tit. 6, § 1304(a)(1)).
109
Ki-Poong Lee v. So, 2016 WL 6806247, at *3 (Del. Super. Ct. Nov. 17, 2016).
110
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
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).
111
Quadrant Structured Prods. Co., Ltd. v. Vertin, 102 A.3d 155, 198 (Del. Ch. 2014).
112
H&M’s Mot. for Summ. J., at 43.
113
Id.-24-
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.114 Given this record evidence, there is a material fact
in dispute—i.e., whether Humanigen was insolvent—that must be developed more
thoroughly.115 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.”116 Accordingly, summary judgment is DENIED.
4. 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
114
Savant’s Br. in Opp’n to Nomis Bay’s Mot. for Summ. J., at 10-12 (D.I. 392).
115
E.g.¸Bobcat N. Am., LLC v. Inland Waste Holdings, LLC, 2019 WL 1877400, at *4 (Del. Super.
Ct. Apr. 26, 2019).
116
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.”).
-25-
requirements.117 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.”118 It next
avers that “[t]he basis for the claim is thus identical to Count [III].”119 Savant then,
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.120 In Count
III—which Savant is no longer pursuing—it says Humanigen breached its obligation
to develop benznidazole.121 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
117
Savant’s Second Am. Compl. ¶¶ 127–28.
118
Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J., at 45–46.
119
Id. at 46.
120
Id.
121Savant’s Second Am. Compl. ¶¶ 113–14.
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payments.122 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.”123 The operative
language is wrongful prevention because “there is no prevention claim where the
contract, in effect, authorizes prevention.”124 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.125
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.”126 A contract between “sophisticated
parties experienced in their industry, weighs in favor of finding an assumption of
risk[.]”127
122
Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J., at 43.
123
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.”).
124
Bobcat, 2019 WL 1877400, at *6 (internal quotation marks omitted).
125
Id. (citation omitted).
126
Id. at *7 (citation omitted).
127
Id. at *8.
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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[.]”128 Plainly, the
conditional language itself—that milestone payments are made “if such milestone is
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.129 The burden is on the party claiming breach to demonstrate that a condition
precedent to the underlying duty has been satisfied.130 A breach-of-contract claim
128
Savant’s Mot. to Dismiss Ex. A at § 3.3 (D.I. 156) [hereinafter MDC].
129
See, e.g., Casey Emp. Servs., Inc. v. Dali, 1993 WL 478088, at *4 (Del. Nov. 18, 1993).
130
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)).
-28-
anchored to an obligation that is contingent on an unexcused or unsatisfied condition
precedent is not cognizable.131
H&M argues that once Chemo Research obtained FDA approval, H&M didn’t
need to perform to the level that Savant demanded.132 It points to MDC Section 5.3,
which defines “Diligent Efforts” to include “level of effort and reasonable standard
in the biopharmaceutical industry[.]”133 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[.]”134 In opposition, Savant
says that, although FDA approval was certainly a hinderance, the Agreement was
not limited to the United States.135 Specifically, it asserts that MDC Section 5.4
provides for the development and commercialization of benznidazole outside of the
United States.136
But MDC Section 5.4 requires an unambiguous condition precedent to be met:
131
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)).
132
H&M’s Br. in Opp’n to Savant's Partial Mot. for Summ. J., at 23.
133
Id. at 24.
134
Id. at 28; MDC § 15.1.
135
Savant’s Br. in Opp’n to H&M’s Mot. for Summ. J., at 45.
136
MDC § 5.4 (“Development, Commercialization outside the United States”).
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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.137
Despite that, Savant insists that “[o]n June 25, 2017, Humanigen achieved the first
milestone event, acceptance of an NDA for benznidazole[.]”138 The record,
however, including the milestone schedules, belies Savant’s contentions.139
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
137
Id.
138
Savant’s Mot. for Summ. J., at 44.
139
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.”).
-30-
after the conclusion of the bankruptcy action.140 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.” 141 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.142
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.143 But, though H&M contends that “Savant never reasserted these
counterclaims after this action was remanded,” it answered these counterclaims on
February 12, 2018.144 Too, Savant’s counterargument is persuasive. Savant
contends that “[c]ourts [] have considered [H&M’s waiver argument and] have
140
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.
141
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.
142
H&M’s Mot. for Summ. J., at 45.
143
Id. at 45, Ex. 51.
144
Id. at 45; see H&M’s Answer to Savant’s Countercls. (D.I 10).
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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.”145
As support, Savant turns to the federal district court’s decision in Hughes v. Abell.146
There, the court confronted a similar issue concerning counterclaims.147 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.”148 H&M offers
little—and certainly, no good—authority for shying from this view.149 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
145
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).
146
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).
147
Hughes, 867 F. Supp. 2d at 91.
148
Id.
149Instead, 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.
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did not reassert these claims after the conclusion of the bankruptcy action.150 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.”151
“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.”152 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
capable of doing prompt and complete justice; (3) involving the same parties and the
same issues?”153
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,
150
H&M’s Mot. for Summ. J., at 45.
151
Id.
152O’Rangers v. Cadia Rehab. Silverside, 2019 WL 1531520, at *6 (Del. Super. Ct. Apr. 8, 2019).
153
LG Elecs., Inc. v. InterDigit. Commc’ns, Inc., 114 A.3d 1246, 1252 (Del. 2015).
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have been answered by H&M, and thus do not constitute split claims.154
3. Savant’s Bankruptcy Proceeding Counterclaim as to Breach of the
Security Agreement Fails as a Matter of Law (Count V).
Having found Savant’s bankruptcy counterclaims alive, the Court turns to the
counterclaim based on breach of the parties’ Security Agreement (the “SA”).155
Deploying SA Section 4, Savant contends Humanigen breached the SA by assigning
SA-defined collateral to Madison despite Humanigen’s alleged duty to retain
ownership of those assets.156
Savant overlooks that neither the SA nor the MDC prohibits assignments.
Under the SA, Humanigen may assign collateral as long as its assignment comports
with the MDC’s terms.157 SA Section 4, too, acknowledges this.158 And, as the
Court previously held, the MDC permits assignments like the one at issue here.159
154
H&M’s Mot. for Summ. J., at 45; see also H&M’s Answer to Savant’s Countercls.
155
See generally Ex. 13 (D.I. 410).
156
See id. § 4.
157
See id. § 5 (“[Humanigen] shall not sell, lease or otherwise dispose of . . . any [c]ollateral,
except . . . in accordance with the terms of the MDC Agreement in connection with any sublicense
or assignment thereunder . . . .”).
158
See id. § 4 (“[Humanigen] . . . shall maintain (other than in accordance with [SA] Section 5) .
. . title to each item of [c]ollateral . . . .” (emphasis added)).
159
MDC § 15.2 (“This Agreement may be assigned by [Humanigen] in whole or in part to any
[t]hird [p]arty without the consent of [Savant].”); see Humanigen, 238 A.3d at 205, 207
(“Humanigen was . . . within its rights under . . . MDC [§ 15.2] to assign the contract to Madison
. . . . The provisions of the MDC permitted the assignment Savant challenges.”). According to
Savant, that ruling was partial motivation for crafting the footnote concession in the first place.
Savant’s Mot. for Rearg. at 1.
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That finding is law of the case and Savant offers no reason to revisit it.160
Accordingly, the assignment cannot support a breach of the SA.
Taken together with the procedural rulings, H&M’s motion against the
Bankruptcy Proceeding Counterclaims is GRANTED in part, and DENIED, in part.
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).161 In
opposition, Savant contends that Humanigen made the transfer to benefit Nomis
Bay, roping it into a fraudulent transfer claim.162 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.”163 In support of
its assertion that Nomis Bay is the beneficiary, Savant states that “70% of the spoils
160
See Del. Dep’t of Nat. Res. & Env’t Control v. Food & Water Watch, 246 A.3d 1134, 1138–
39 (Del. 2021) (“The law of the case is established when a specific legal principle is applied to an
issue presented by facts [that] remain constant throughout the litigation. [It] requires that issues
already decided by the same court . . . be adopted without relitgation . . . . In more simplified terms,
the law of the case doctrine operates as a form of intra-litigation stare decisis.” (internal quotation
marks and citations omitted)).
161
Nomis Bay’s Mot. for Summ. J., at 12.
162
Savant’s Br. in Opp’n to Nomis Bay’s Mot. for Summ. J., at 17.
163
Id. at 19 (citing In re Direct Response Media, Inc., 466 B.R. 626, 654 (Bankr. D. Del. 2012)).
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of any lawsuit [are given] to Nomis Bay[.]”164 A party’s beneficiary status in the
fraudulent transfer context is a question of law, making summary judgment a
possibility here.165
A non-transferor or non-transferee can be liable for fraudulent transfer if it is
a beneficiary of the fraudulent transfer.166 To detect beneficiary status, this Court
engages the same three-factor test bankruptcy courts use.167 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
beneficiary.”168 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.169 Though Savant
believes that Nomis Bay is set to receive “70% of the spoils,”170 future judgments
164
Id.
165Pike 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. . . .”).
166
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).
167
In re Green Field Energy Servs. Inc., 2018 WL 1116374, at *1.
168
Id.
169See DEL. CODE ANN. tit. 6, § 1308; In re Green Field Energy Servs. Inc., 2018 WL 1116374,
at *1.
170
Savant’s Br. in Opp’n to Nomis Bay’s Mot. for Summ. J., at 19.
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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.171 H&M points to MDC
Section 4.8 as the operative contractual section allowing for such credit.172 That
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.173 Savant argues that H&M’s claim here
must fail because there are two condition precedents that Humanigen did not
satisfy.174 First, Savant alleges Humanigen never sent a valid invoice. And second,
171
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.
172
H&M’s Br. in Opp’n to Savant's Partial Mot. for Summ. J., at 29.
173
MDC § 4.8.
174
Savant’s Mot. for Partial Summ. J., at 21.
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Savant alleges Section 4.8 is only triggered if the Acquired Assets175 are insufficient
or inadequate.176
“The proper construction of any contract . . . is purely a question of law.”177
The goal of contract interpretation “is to fulfill the parties’ expectations at the time
they contracted.”178 “But because Delaware adheres to an objective theory of
contracts,” the Court’s interpretation must be intelligible to an “objective, reasonable
third party.”179 To that end, the Court construes “clear and unambiguous terms
according to their ordinary meaning.”180 Ambiguity exists only if the disputed
175
MDC § 2.1 (defining Acquired Assets).
176
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.’”).
177
Exelon Generation, 176 A.3d at 1266–67 (quoting Rhone-Poulenc Basic Chems. Co. v. Am.
Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992)).
178
Leaf Invenergy Co. v. Invenergy Renewables LLC, 210 A.3d 688, 696 (Del. 2019) (internal
quotation marks omitted).
179
Id. (alteration and internal quotation marks omitted).
180
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)).
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language is “fairly or reasonably susceptible to more than one meaning.”181
Summary judgment cannot be granted if a disputed contract term is ambiguous.182
Savant’s first argument can’t command summary judgment because Savant
can’t point to MDC language defining “invoices and reasonable supporting
details.”183 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.184 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.185 The Court can’t resolve “two equally
reasonable, but conflicting, interpretations” of contract language on summary
181
Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012).
182
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)).
183
Savant’s Reply Br., at 19 (D.I. 408) (citing MDC § 4.8).
184
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.
185
H&M’s Br. in Opp’n to Savant’s Mot. for Summ. J., at 19.
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judgment.186 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.187
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.”188 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.189
But Savant neglects to respond to the second part of H&M’s Count V claim—
breach of MDC Section 10.1.190 Specifically, H&M states that “[w]hen information
requests were made under Section 10.1 for materials, Savant rebuffed them.”191 In
186
GMG Cap., 36 A.3d at 784.
187
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.”).
188
H&M’s Second Am. Compl. ¶ 178.
189
Savant’s Mot. for Partial Summ. J., at 42.
190
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
191
Compel the Produc. of Docs. (D.I. 39)).
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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.192
“[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.”193 Savant, though, presents no law or facts addressing the
latter part of H&M’s Count V claim, namely MDC Section 10.1.194 Accordingly,
Savant has failed to meet its initial burden, and its Motion for Summary Judgment
on this claim is therefore DENIED.
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.”195 Here, H&M alleges
Humanigen relied on Savant’s misrepresentations and was induced into entering the
MDC because of these misrepresentations.196 In response, Savant claims that: (1) it
192
Savant’s Reply Br., at 23.
193
Moore, 405 A.2d at 680.
194
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.
195
H&M’s Second Am. Compl. ¶ 181.
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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.197 Additionally,
Savant suggests this claim should fail because H&M cannot prove scienter and the
claim is barred by an integration clause.198 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.
a. The MDC Does Not Bar Fraud Claims.
Delaware “abhors” fraud.199 But Delaware also promotes freedom of contract
“as a matter of fundamental public policy.”200 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
196
Id. ¶¶ 185–86.
197
Savant’s Mot. for Partial Summ. J., at 28-31; see also MDC § 9.9.
198
Savant’s Mot. for Partial Summ. J., at 37, 39.
199
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.”).
200
NACCO Indus., Inc. v. Applica Inc., 997 A.2d 1, 29 (Del. Ch. 2009).
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parties are and are not making and relying upon.”201 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.”202 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
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.203
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.204
201
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).
202
Kronenberg v. Katz, 872 A.2d 568, 593 (Del. Ch. 2004).
203
Id.
204MDC § 15.13 (“Entire Agreement; Amendments”).
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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.205 But it is well-established that “[a] standard integration clause,
without more, is insufficient to disclaim all reliance on extra-contractual
statements.”206 That is because an integration clause “simply operates to police the
variance of the agreement by parol evidence.”207 In only defining the agreement, an
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].” 208 As
a result, § 5.13—which is unaccompanied by any additional evidence of anti-
reliance—doesn’t bar the fraudulent inducement claim.209
205
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).
206
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.”).
207
Kronenberg, 872 A.2d at 592.
208
Anschutz Corp. v. Brown Robin Cap., LLC, 2020 WL 3096744, at *13 (Del. Ch. June 11, 2020)
(alteration in original) (internal quotation marks omitted).
209
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)).
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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.210 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.211
As a last resort, Savant cites Great Lakes Chemical Corp. v. Pharmacia Corp.
for the proposition that, because Savant and Humanigen are “two sophisticated
corporations” who executed a contract with negotiated terms, H&M is precluded
from bringing fraud claims.212 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.213 Here, as explained,
210
Savant’s Mot. for Partial Summ. J., at 39.
211
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).
212
Savant’s Reply Br., at 17 (citing Great Lakes Chem. Corp. v. Pharmacia Corp., 788 A.2d 544,
556 (Del. Ch. 2001)).
213
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
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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.214 But ultimately, the
dispositive question is whether the agreement between those sophisticated parties
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.215 And last, Savant
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.”).
214
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).
215
See W. Willow–Bay, 2007 WL 3317551, at *9 (“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
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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.216
Fraud claims aren’t barred by the MDC.
b. Savant’s Scienter is a Fact Issue.
Under Delaware law, fraudulent inducement and common law fraud have the
same elements.217 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.218
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).
216
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).
217
Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 2018 WL 6311829,
at *31 (Del. Ch. Dec. 3, 2018).
218
Stephenson v. Capano Dev., Inc., 462 A.2d 1069, 1074 (Del. 1983) (formatting added).
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“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.”219 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.”220
But, “when an ultimate fact to be determined is one of motive, intention or other
subjective matter, summary judgment is ordinarily inappropriate.”221 Here, the
disputed record contains multiple facts on which a scienter argument could be
based.222 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 exist 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.
219
In re Wayport, Inc. Litig., 76 A.3d 296, 326 (Del. Ch. 2013).
220
Deloitte LLP v. Flanagan, 2009 WL 5200657, at *8 (Del. Ch. Dec. 29, 2009) (internal
quotation marks and citation omitted).
221
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).
222
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).
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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.223 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.224 Specifically, Savant alleges Humanigen
learned Instituto de Efectividad Clínica y Sanitaria (“IECS”) was planning on
challenging the Data License Agreement months before the MDC was executed.225
What’s 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.226 Savant insists that Humanigen had the March 7th
email in its possession, showing actual or constructive knowledge of Dr. Estani and
the data exclusivity issues.227 But Savant resolve on this erodes when it tells the
223
H&M’s Second Am. Compl. ¶ 184.
224
Savant’s Mot. for Partial Summ. J., at 33.
225
Id. at 34.
226
Id. at 4–5.
227
Id. at 4.
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Court, “[t]he March 7[, 2016] email was likely in Humanigen’s possession before
the execution of the MDC.”228
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.229 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.
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.230 But then, quizzically, Savant says that regardless of how the
Court would rule on that offset question, Savant is entitled to its payment now.231
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
228
Id. at 10 (emphasis added).
229
Id. at 4, 10.
230
Savant’s Mot. for Partial Summ. J., at 45.
231
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otherwise entitled to receive.232 But, in Fleet National, the Court of Chancery found
the party “made no serious effort to support that offset claim.”233 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 VI234 (Breach
of Contract) and H&M’s Count I235 (Breach of MDC Section 4.8). As to both of
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 dispositions 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 is DENIED;
• Savant’s Motion for Summary Judgment as to Counterclaims I (Breach)
and II (Breach) of Savant’s Bankruptcy Counterclaims is DENIED;
232
2001 WL 1333405, at *14 (Del. Ch. Oct. 15, 2001).
233
Id.
234In 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.
235
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
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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• Humanigen’s Motion for Summary Judgment as to Count I (Declaratory
Judgment) is GRANTED.
• 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 III (Breach) is
GRANTED.
• 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.
• Humanigen’s Motion for Summary Judgment as to Savant’s Bankruptcy
Counterclaims is GRANTED, in part (i.e., Counterclaim V), and
DENIED, in part (i.e., Counterclaims I–IV, VI).
• 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
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