Mutual Pharmaceutical Company v. Spireas, S.

J-A27044-16
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
MUTUAL PHARMACEUTICAL COMPANY, IN THE SUPERIOR COURT OF
INC., AND UNITED RESEARCH PENNSYLVANIA
LABORATORIES, INC.
Appellants
v.
SPIRIDON SPIREAS, ERIC WARREN
GOLDMAN, PERSONAL REPRESENTATIVE
OF THE ESTATE OF SANFORD M.
BOLTON AND HYGROSOL
PHARMACEUTICAL CORP.
Appellees No. 1287 EDA 2016
Appeal from the Order March 16, 2016
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): 000741, May 2011
BEFORE: PANELLA, J., LAZARUS, J., and FITZGERALD, J.*
MEMORANDUM BY LAZARUS, J.: FILED APRIL 03, 2017
Mutual Pharmaceutical Company, Inc., and United Research
Laboratories, Inc., (collectively, “Mutual” or “Appellants”) appeal from the
order, entered in the Court of Common Pleas of Philadelphia County, which
granted summary judgment1 in favor of Dr. Spiridon Spireas, the Estate of
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*
Former Justice specially assigned to the Superior Court.
1
The order granting summary judgment did not dispose of all claims in this
matter since Spireas and Hygrosol have counterclaims that remain pending.
However, the order was certified as final to assist in the resolution of the
case. See Order, 4/12/16; Pa.R.A.P. 341(c).
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Dr. Sanford M. Bolton, and Hygrosol Pharmaceutical Corporation
(collectively, “Spireas” or “Appellees”). After careful review, we affirm.
The trial court summarized the relevant facts of this matter as follows:
This case involves an effort by a generic drug manufacturer to
revisit a 1998 patent licensing agreement [(the “Licensing
Agreement”)] on grounds that include fraud. After earning
hundreds of millions of dollars by using the license, [Mutual] now
claim[s] breach of contract, fraudulent misrepresentation, and
unjust enrichment. [Mutual] also ask[s] for declaratory
judgment.[2]
...
The patents involve “liquisolid technology” which was developed
by Dr. Sanford Bolton and Dr. Spiridon Spirea[s] at laboratories
at St. John’s University [(“St. John’s” or the “University”)] in
New York in the 1990’s. Liquisolid techniques are prized by
generic pharmaceutical companies because the technology
makes their production of liquid-based drug products
substantially easier. The doctors licensed their patents to
[Mutual] in 1998, but the events leading up to the present
dispute began in the 1980’s.
In 1986, Dr. Bolton was a St. John’s professor and Dr. Spireas
was his doctoral student. During their collaboration, they both
signed agreements with St. John’s relating to who owns patent
rights over technology they were developing at St. John’s. Dr.
Spireas’ chief interest was “liquisolid” research and he wrote his
dissertation on the subject under Dr. Bolton’s sponsorship. Dr.
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2
Mutual requested a declaration that: (1) Appellees do not own any right,
title or interest in the technology, patent, or process in the patent that are
the subject of this litigation; (2) Spireas and Bolton did not have the full and
exclusive right to license, utilize or market the technology; (3) Mutual has
no remaining payment obligations under the parties’ license agreement; (4)
a constructive trust is proper and shall be imposed; (5) Mutual is entitled to
an award of all fees and costs incurred in bringing and prosecuting this
action; and (6) Mutual is entitled to pre- and post-judgment interest.
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Spireas left St. John’s after he received his Ph.D. in 1993; Dr.
Bolton retired from St. John’s the next year.
Bolton and Spireas then formed [Hygrosol]. Patents were
granted to the doctors and their company and [Mutual] sought
licensing rights. In 1998[,] the parties entered into a License
Agreement which assured that the licensors were “the sole and
exclusive owners of all rights, title and interest in and to the
Technology and the Patent.” By all accounts, this license proved
to be very profitable for [Mutual].
Thereafter, St. John’s filed a federal lawsuit against the doctors
and Hygrosol asserting claims about patent assignment and
distribution of profits earned through licensing. St. John’s claims
derived from their 1980’s agreements with Bolton and Spireas.
While St. John’s federal lawsuit was pending, Mutual filed this
lawsuit, alleging Bolton, Spireas and Hygrosol misrepresented
their ownership rights to the [l]iquisolid patents. They claim
misrepresentation caused them an unknown monetary loss. On
January 16, 2015, the three defendants and St. John’s settled
their lawsuit in federal court.
Trial Court Opinion, 3/16/16, at 1-2 (citations omitted).
After the federal suit settled, a stay that had been placed on this
litigation was lifted. Bolton’s estate filed a motion for summary judgment on
June 25, 2015, which was joined by Spireas and Hygrosol. Oral argument
took place on January 20, 2016, and the trial court granted the motion on
March 16, 2016. At Mutual’s request, the court issued an order on April 12,
2016, indicating that the order granting summary judgment in favor of
Appellees was a final order, an appeal of which would facilitate resolution of
the case. See Pa.R.A.P. 341(c). Thereafter, Mutual filed a timely notice of
appeal. Mutual raises the following issues for our review:
1. Whether the trial court erred in holding, before discovery was
complete, that [Appellees’] settlement agreement with a third
party precluded Mutual’s claim for declaratory judgment that
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a patent license was voidable because Appellees did not own
the patent they purported to license to Mutual?
2. Whether the trial court erred by dismissing contract and
fraudulent inducement claims, before discovery was
complete, based on the conclusion that Mutual could not
prove it was injured by having paid tens of millions of dollars
in patent royalties to Appellees[,] who did not even own the
patent at issue?
3. Whether the trial court erred in dismissing an unjust
enrichment claim on the ground that the parties have a
contractual relationship before it ha[d] been adjudicated
whether the parties’ patent license agreement is valid?
4. Whether the trial court erred in dismissing Mutual’s claims
before it could take relevant fact discovery and before any
expert discovery whatsoever?
Brief for Appellants, at 5.
We begin by stating our standard and scope of review of an order
granting summary judgment:
Our scope of review is plenary, and our standard of review is the
same as that applied by the trial court. . . . An appellate court
may reverse the entry of a summary judgment only where it
finds that the lower court erred in concluding that the matter
presented no genuine issue as to any material fact and that it is
clear that the moving party was entitled to a judgment as a
matter of law. In making this assessment, we view the record in
the light most favorable to the non-moving party, and all doubts
as to the existence of a genuine issue of material fact must be
resolved against the moving party. As our inquiry involves solely
questions of law, our review is de novo.
Thus, our responsibility as an appellate court is to determine
whether the record either establishes that the material facts are
undisputed or contains insufficient evidence of facts to make out
a prima facie cause of action, such that there is no issue to be
decided by the fact-finder. If there is evidence that would allow
a fact-finder to render a verdict in favor of the non-moving
party, then summary judgment should be denied.
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LEM 2Q, LLC v. Guar. Nat. Title Co., 144 A.3d 174, 178 (Pa. Super. 2016)
(en banc) (citation omitted).
In its first issue, Mutual asserts that granting summary judgment in
favor of Spireas was premature with regard to its claim for declaratory
judgment that the patent license was voidable. We disagree.
It is undisputed that Spireas entered into an agreement with Mutual to
license the patents without owning rights to the patents, since those rights
had been conveyed to the University. However, it is also undisputed that
Mutual paid royalties to Spireas as set forth in the Licensing Agreement
because Mutual profited from its use and development of the patents.
The trial court granted summary on account of the settlement between
Spireas and the University. While Spireas and the University have settled
both retroactively and prospectively regarding ownership of the patents, we
note that Mutual has not been specifically released by the University as part
of the settlement.
As to
[t]he Declaratory Judgments Act[,42 Pa.C.S. §§ 7531-7541, it]
empowers courts “to declare rights, status, and other legal
relations whether or not further relief is or could be claimed,”
and these declarations “have the force and effect of a final
judgment or decree.” [42 Pa.C.S.] § 7532. To bring a
declaratory judgment action,
there must exist an actual controversy, as declaratory
judgment is not appropriate to determine rights in
anticipation of events which may never occur. It is an
appropriate remedy only where a case presents
antagonistic claims indicating imminent and inevitable
litigation.
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Selective Way Ins. Co. v. Hosp. Grp. Servs., Inc., 119 A.3d 1035, 1046
(Pa. Super. 2015) (citations and brackets omitted). Additionally, declaratory
judgment is not available “for consideration of moot cases or as a medium
for the rendition of an advisory opinion which may prove to be purely
academic.” Gulnac by Gulnac v. S. Butler County Sch. Dist., 587 A.2d
699, 701 (Pa. 1991).
We note that the allegedly “antagonistic claims indicating imminent
and inevitable litigation” include other lawsuits against Mutual that have
been filed by Spireas’ companies, Hygrosol and SigmaPharm, seeking
additional royalties. Additionally, Mutual is apparently threatened by a
lawsuit not yet initiated by the University against Mutual in relation to the
royalties paid to Spireas regarding use of the patents. The trial court held
that because “all [Appellees] have settled their differences with St. John’s
University,” no “threat of litigation, let alone any that is ‘imminent and
inevitable,’” exists that would affect Mutual and justify a declaratory
judgment. Trial Court Opinion, 3/16/16, at 5. Mutual takes issue with this
assessment, noting that
[t]he trial court seemed to believe that Mutual brought the
declaratory action against [Appellees] solely out of fear that the
University might sue Mutual, and also to consider the University
unlikely to bring such a claim. But . . . Mutual also brought its
declaratory action because of the ongoing controversy between
Mutual and [Appellees] over Mutual’s obligation to pay additional
royalties under the License Agreement [in the Hygrosol and
SigmaPharm cases].
Brief for Appellants, at 27.
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Mutual cannot move forward with a declaratory action to hold the
Licensing Agreement voidable on the basis of the ongoing litigation in the
Hygrosol and SigmaPharm suits, however, because it has represented that
the claims in those matters are “wholly distinct from, and unrelated to, the
claims in the Complaint” in this matter. Mutual Motion to Sever, at ¶ 13.
Hygrosol’s claims were initially counterclaims that Mutual convinced the trial
court to sever from the instant action because the claims were allegedly
separate. Thus, Mutual cannot now attempt to argue they are intertwined.
Moreover, “declaratory relief should be withheld when the request for relief
is an attempt to adjudicate the validity of a defense to [another] lawsuit.
Osram Sylvania Prod., Inc. v. Comsup Commodities, Inc., 845 A.2d
846, 848 (Pa. Super. 2004).
As to the allegedly imminent threat of litigation involving the
University, we note that although Mutual was not released from liability, a
release was offered to Mutual in exchange for dismissing the instant
litigation and Mutual refused to enter into it. See Appellant’s Brief, at 27.
The University has been compensated via the settlement with Spireas,
making the University seeking further recovery from Mutual an unlikely
proposition since the additional damages would be speculative. Indeed,
though the trial court did not spell it out in so many words, the settlement
between the University and Spireas essentially vitiates any claims the
University may have against Mutual. Thus, the entry of a declaratory
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judgment in Mutual’s favor in these circumstances essentially would be an
academic exercise. Selective Way, supra.
Moreover, the Licensing Agreement is not voidable as a matter of law,
since Mutual has been profiting from the contract and has been getting the
benefit of its bargain for nearly 20 years since entering into it in 1998;
rescission of the contract would be an appropriate remedy only if the parties
could be returned to their original positions. See Fichera v. Gording, 227
A.2d 642, 644 (Pa. 1967) (“[R]escission should be made while the parties
can still be restored to their original positions.”); see also Gilmore v.
Northeast Dodge Co., 420 A.2d 504, 507 (Pa. Super. 1980) (“The purpose
of equitable rescission is to return the parties as nearly as possible to their
original positions where warranted by the circumstances of the transaction.”)
Here, because of the profit from the Licensing Agreement that has flowed to
all parties involved, it is not possible to return the parties to their original
positions. Returning the parties to their original positions is also not
warranted by the circumstances presented in this case, since the
arrangement between the parties has been a successful one. Accordingly,
the Licensing Agreement cannot be deemed voidable, nor can Mutual have
the option of rescinding the agreement. The trial court therefore did not err
in granting summary judgment. LEM 2Q, supra.
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Next, Mutual asserts that the trial court erred by dismissing its
contract and fraudulent inducement claims,3 based on the conclusion that
Mutual could not prove it was injured by having paid patent royalties to
Appellees.
We note that Mutual would not have had to pay royalties to Spireas
unless it was making a profit as set forth in the Licensing Agreement.
Mutual appears to believe it would not have paid as much in royalties had it
negotiated a different licensing agreement with someone other than Spireas
or Bolton. This argument is wholly speculative. Additionally, as we noted
above, Mutual has received the benefit of its bargain for nearly 20 years; it
is a stretch for Mutual to claim damages for paying royalties after making its
profit as established in the Licensing Agreement. Mutual argues that
Appellees did not own the patents and therefore they could not license them,
and that this indicates an injury to Mutual. While the University may have
had an ownership interest in the patents, Dr. Bolton had the authority to
license the patents in any event. See St. John’s University Complaint, at ¶
49 (“Bolton had a contractual obligation to account to [the University] for all
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3
We note the incongruity of Mutual claiming that the contract with Spireas
was illusory and simultaneously maintaining a breach of contract action.
See Wedgewood Diner, Inc. v. Good, 534 A.2d 537, 538 (Pa. 1987)
(“Appellants may not maintain at the same time in separate counts of one
action . . . claims for rescission of a contract and restitution on the one hand
and for damages for breach of the same contract together with expectation
interest, on the other hand. These remedies are essentially inconsistent.”)
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revenues received, by or on behalf of Bolton, in connection with any
patentable inventions, discoveries, processes, uses, products, or
combinations, resulting, in whole or in part, from Bolton’s use of the
laboratories or other facilities of [the University.]” (emphasis added)). Thus,
this argument fails.
Mutual’s third claim on appeal is that the trial court erred in dismissing
its unjust enrichment claim on the basis that a contractual relationship exists
between the parties. However, Mutual has admitted that an enforceable
contract exists. See [Appellees’] Complaint, at ¶ 57 (“The License
Agreement is a valid and enforceable contract.”). Thus, Mutual has chosen
to affirm the contract, and were it appropriate, damages would be the
correct remedy. Accordingly, we find this issue to be without merit. See
Wedgewood Diner, supra at 538 (one can seek either equitable remedy or
damages; affirmance of contract allows for legal remedy of recovery of
damages).
Finally, Mutual argues in broad fashion that summary judgment was
prematurely granted prior to the completion of relevant fact and expert
discovery taking place. However, as our analysis of the issues above shows,
such discovery would not magically turn Mutual’s claims into good claims as
a matter of law. Accordingly, this issue is without merit.
Order affirmed.
Justice Fitzgerald did not participate in the consideration or decision of
this matter.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 4/3/2017
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