Antrim Pharmaceuticals LLC v. Bio-Pharm, Inc.
Filing
85
MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 4/19/2018: For the reasons stated in the accompanying Memorandum Opinion and ORder, the Court denies Antrim's motion for summary judgment [dkt. no. 63]. The court gran ts Bio-Pharm's motion for summary judgment on Antrim's unjust enrichment claim (count 3 of Antrim's complaint), partially grants the motion on Antrim's breach of contract claim (count 1) to the extent the claim applies to ondansetron, and otherwise denies the motion [dkt. no. 75]. The case is set for a status hearing on April 24, 2018 at 9:30 a.m. to set a trial date and discuss the possibility of settlement. (mk)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ANTRIM PHARMACEUTICALS LLC,
Plaintiff,
vs.
BIO-PHARM, INC.,
Defendant.
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Case No. 16 C 784
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Antrim Pharmaceuticals LLC sought to manufacture and sell generic
pharmaceuticals. Antrim began to work with Bio-Pharm, Inc. a contract manufacturer,
to produce two drugs, but their arrangement collapsed after Bio-Pharm withheld
shipment of one of the products. Antrim has sued Bio-Pharm for breach of contract and
unjust enrichment. Bio-Pharm has counterclaimed against Antrim, asserting claims of
promissory estoppel and breach of contract. Both have moved for summary judgment.
Background
The present suit arises from a dispute between Antrim and Bio-Pharm involving
the production of two generic drugs, escitalopram and ondansetron. 1 The following
background focuses on four events leading to the present dispute: the execution of a
term sheet outlining a plan to create a new entity, the subsequent dealings between
1
Escitalopram is the generic form of Lexapro, and ondansetron is the generic form of
Zofran.
Antrim and Bio-Pharm, Antrim's navigation of the regulatory barriers to its sale of the
pharmaceuticals, and the breakdown of the relationship between the two companies.
I.
Term Sheet
In December 2009, Antrim (then doing business as BrianT Laboratories of Illinois
LLC), Bio-Pharm, and S. Zhaveri Pharmakem PVT, Ltd. entered into an agreement
regarding a prospective venture. The Court refers to this agreement as the Term Sheet.
The Term Sheet was drafted to "formaliz[e] the relationship" between the three entities
seeking to form a new entity to produce pharmaceutical products. D.E. 77, Def.'s Ex. 2
at Antrim 0002329. Antrim would own sixty percent of the new venture; Zhaveri and
Bio-Pharm would each own twenty percent.
According to its terms, the Term Sheet was to be replaced by a "Definitive
Agreement" within 90 days. It also provided that, "[i]n case a Definitive Agreement is
not entered into within the aforesaid period for reason that any of the Parties is not
interested in continuing with the subject matter stated herein, then the Agreement the
Term Sheet [sic] shall stand terminated . . . ." Id. at Antrim 0002334. Zhaveri departed
from the arrangement, but Antrim and Bio-Pharm continued to pursue a business
relationship. They never created a new entity.
II.
Antrim and Bio-Pharm's relationship
In November 2010, approximately a year after creating the Term Sheet, Brian
Tambi, one of the owners of Antrim, e-mailed Amit Shah, Bio-Pharm's Vice President of
Corporate Development, stating: "As you know we don't have an Agreement as yet. . . .
I suggested that we just follow the [Term Sheet] and I will see about making it an
operational Agreement." D.E. 77, Def.'s Ex. 7 at BIO-PHARM 013287. Shah
2
responded: "I agree that we should not spend anymore money with lawyers and
agreement and we are fine with formailizing [sic] and reactivating the [Term Sheet]." Id.
The parties continued to discuss the matter in e-mails and otherwise. See D.E.
82, Pl.'s Ex. 34 at Antrim 0002551-53 (Mar. 7, 2012 Tambi e-mail to Shah). In August
2012, Shah sent an e-mail to Tambi in which he described the current status of the
parties' relationship: "[Y]ou decided you would continue the relationship with BioPharm. We also showed our interest in receiving some type of equity
investment/committment [sic] as we felt that would make the most sense for us so as
not to have conflicts and also grow each others businesses in the best possible
manner." Id. at Antrim 0002551.
In January 2013, Shah e-mailed Tambi, writing "[w]e would like to have a final
agreement at the moment we just have the Term Sheet." D.E. 77, Def.'s Ex. 8 at Antrim
0001954. Shah also stated: "We feel for the level of work we are putting in to the
project during the development and eventual commercialization we would like to have a
larger share in the product." Id. In response to Shah's first point, Tambi responded:
"Agree—I will finalize the Agreement." Id. He also wrote: "I regret I cannot change the
Terms we agreed unless there is something patently unfair. As I countered on the
Phone, Amit, I do not find this to be the case. I have been subject to this type of postAgreement suggestions by Companies in India and I have recinded [sic] the
Agreements." Id.
In subsequent e-mails, Shah and Tambi continued to dispute whether Bio-Pharm
was entitled to equity. In July 2015, Shah e-mailed a draft agreement to Tambi that
contained a section stating that Antrim and Bio-Pharm would "jointly own the products in
3
a ratio of 75:25%." D.E. 82, Pl.'s Ex. 9 at Antrim 0001252. Tambi deleted the
ownership section and replaced it with a term providing for a profit-sharing arrangement
in which Bio-Pharm would receive twenty-five percent and Antrim seventy-five percent
of the profits over the commercial life of the product. .Id.
Antrim contends that, during the same period the e-mails were exchanged, Shah
and Tambi engaged in phone conversations about their arrangement. During his
deposition, Tambi testified to numerous phone calls he had with Shah, in which he said
they agreed to a profit-sharing arrangement, as opposed to an equity share:
Q. Did Amit ever say to you in writing, I understand that Bio-Pharm does
not have any equity in Escitalopram?
A. I think that he – he understood that. There are a number of telephone
calls where that was acknowledged.
Q. Okay.
A. Now, whether we put it into an e-mail, I don't know, but I will – we will
search for it.
Q. Yeah. That's my question, is: Did he ever say that to you in writing?
A. Not in writing, but I think – I am very positive that he said he said he
understood that on telephone calls.
Id., Pl.'s Ex. 1 at 245-46. But Tambi also testified that he was not able to "definitively"
state that Shah conceded that Bio-Pharm would have no equity share. Id. at 110.
Tambi testified that an oral agreement between the parties was formed under which
Bio-Pharm would obtain twenty-five percent of the profits over the life of the products
and would be compensated for its costs in manufacturing the drug through the proceeds
of the sale of the drug. Tambi also testified that Bio-Pharm would be compensated
upon sale of the drug based on the cost of production, plus ten percent. Shah likewise
4
testified that Bio-Pharm would be reimbursed from the sales proceeds.
III.
Antrim's ability to market
Meanwhile, Antrim was also engaged in the process of obtaining regulatory
approval to manufacture and market escitalopram and ondansetron. To obtain approval
to market the pharmaceuticals, Antrim was required to successfully complete an
Abbreviated New Drug Application (ANDA) for approval by the Food and Drug
Administration. Part of the ANDA process includes shipping samples of the products for
FDA review. Bio-Pharm produced these samples and supplied them for the ANDA.
The FDA approved Antrim's ANDA for escitalopram on February 2, 2012. But the FDA
has never approved Antrim's ANDA for ondansetron.
Additionally, Antrim was required to find a third party that could market and
distribute the pharmaceuticals that Bio-Pharm produced. At the time, Antrim planned to
use Leading Pharmaceuticals, an entity licensed to fulfill this role. The parties dispute
whether the relationship was finalized. Antrim also contends that it has secured an
agreement with another third-party seller, RxTPL, but it is unclear from the record
whether a contract between Antrim and RxTPL exists.
IV.
Bio-Pharm withholds escitalopram
After the FDA approved the ANDA for escitalopram and as Leading
Pharmaceuticals and Antrim were finalizing a distribution agreement, Bio-Pharm
withheld shipment of the escitalopram (Bio-Pharm concedes this). Antrim and BioPharm never sold any of the pharmaceuticals Bio-Pharm produced. Bio-Pharm
contends that it incurred $277,000 in manufacturing costs: $152,000 for escitalopram
and $125,000 for ondansetron. Bio-Pharm alleges that in manufacturing the products, it
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relied on Antrim's purported promise to provide it with an equity share; it says it withheld
the products when Antrim declined to extend the promised equity.
In January 2016, Antrim sued Bio-Pharm for breach of contract and conversion.
The Court later dismissed the conversion claim. Antrim Pharms. LLC v. Bio-Pharm,
Inc., 16 C 784, D.E. 21 (N.D. Ill. June 12, 2016). Bio-Pharm has counterclaimed,
asserting claims of promissory estoppel and breach of contract. Both parties have
moved for summary judgment.
Discussion
To prevail on a motion for summary judgment, the movant must "show[] that
there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law." Fed. R. Civ. P. 56(a). When considering a motion for
summary judgment, the Court takes all reasonable inferences and construes all facts in
favor of the nonmoving party. Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697,
706 (7th Cir. 2011). To defeat summary judgment, the nonmoving party must
"produc[e] evidence that is more than 'merely colorable,' that there is a genuine issue
for trial." Id. (citation omitted).
I.
Antrim's motion for summary judgment
Antrim seeks summary judgment on the promissory estoppel and breach of
contract claims in Bio-Pharm's counterclaim, which Bio-Pharm asserts in the alternative.
In its promissory estoppel claim, Bio-Pharm alleges that Antrim made a promise to
provide Bio-Pharm a share of equity in the products, among other benefits, in return for
manufacturing the products. In its breach of contract claim, Bio-Pharm alleges that
Antrim assented to a contract based upon the Term Sheet that promised Bio-Pharm a
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share of equity in the pharmaceuticals. Bio-Pharm further alleges that Antrim breached
that contract by denying Bio-Pharm the promised equity.
In seeking summary judgment, Antrim first argues that although Bio-Pharm is
looking for damages for the deprivation of an equity stake, it has not introduced
evidence of damages from this deprivation. Antrim contends it is entitled to summary
judgment on both claims as a result. Bio-Pharm disputes Antrim's characterization of its
claim: it says it is seeking damages for the losses it incurred while investing in the
manufacturing processes to produce the pharmaceuticals, not for Antrim's refusal to
extend an equity stake. Bio-Pharm argues that it has presented sufficient evidence to
establish damages. The Court concurs, as Bio-Pharm has introduced adequate
evidence of the $277,000 it expended in manufacturing costs for a reasonable jury to
find in its favor on this point. See D.E. 77, Def.'s Ex. 6 at ¶ 20 (Shah Decl.); D.E. 78,
Def.'s Ex. 1 (Breakdown of Costs). Antrim is not entitled to summary judgment on this
basis.
Second, Antrim argues it is entitled to summary judgment because the damages
Bio-Pharm asserts—unpaid manufacturing costs—only arose because Bio-Pharm
refused to ship the drugs. Antrim contends that Bio-Pharm agreed to be paid out of the
profits of the sale of the pharmaceuticals and that, by refusing to ship the products, BioPharm caused the very losses of which it complains. Bio-Pharm retorts that it had no
obligation to perform because Antrim repudiated the contract by refusing to provide an
equity stake, as specified in the contract that Bio-Pharm contends arose from the Term
Sheet.
The Court cannot resolve this dispute in Antrim's favor on a motion for summary
7
judgment, for a reasonable jury could find that the contract that Bio-Pharm contends
was formed actually exists. First, under the Term Sheet, Bio-Pharm was to obtain a
twenty percent share of equity in the venture that the Term Sheet assumed would be
created. Although the joint venture never materialized, there is evidence that Tambi
and Shah agreed in November 2010 to "formaliz[e]" and "reactivat[e]" the Term Sheet in
lieu of creating another agreement. D.E. 77, Def.'s Ex. 7 at BIO-PHARM 013287.
Again, in January 2013, Shah e-mailed Tambi to ask for a final agreement because "at
the moment we just have the Term Sheet." Id., Def.'s Ex. 8 at Antrim 0001954. Tambi
concurred. Id. Even though the Term Sheet specified that it would terminate after a
certain period if no final agreement was reached, id., Def.'s Ex. 2 at Antrim 0002334
(Term Sheet), the Court is not convinced that this otherwise forecloses Bio-Pharm's
contract argument, as a reasonable jury could find that the parties thereafter expressed
their intention to be bound by the terms of the Term Sheet.
Based on this evidence, a reasonable jury could conclude that Bio-Pharm had a
contractual right to equity in the products. And if a jury so found, it could reasonably
determine that Antrim repudiated the contract by denying Bio-Pharm its ownership stake
in the pharmaceuticals.
Antrim relies upon upon In re Marriage of Olsen, 124 Ill. 2d 19, 528 N.E.2d 684
(1988), to show that it did not repudiate the contract. In Marriage of Olsen, the Illinois
Supreme Court held that an anticipatory repudiation "requires a clear manifestation of
an intent not to perform the contract[.]" Id. at 24, 528 N.E.2d at 686. But here there is
evidence that Antrim clearly manifested that it would not extend Bio-Pharm an equity
stake, so Marriage of Olsen affords Antrim little aid.
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For the foregoing reasons, the Court denies Antrim's motion for summary
judgment on either of the claims in Bio-Pharm's counterclaim
II.
Bio-Pharm's motion for summary judgment
Bio-Pharm has moved for summary judgment on Antrim's breach of contract and
unjust enrichment claims. Bio-Pharm argues it is entitled to summary judgment on
Antrim's breach of contract claim for four reasons: Antrim cannot establish that an oral
agreement superseded the Term Sheet; Bio-Pharm did not cause Antrim damages;
Antrim is a new business that, under Illinois law, cannot recover lost profits; and Antrim
failed to mitigate its damages. Bio-Pharm also argues Antrim's unjust enrichment claim
fails because there is no evidence Bio-Pharm ever benefitted by retaining the products.
A.
Superseding agreement
Antrim's breach of contract claim is based on an alleged agreement formed after
the execution of the Term Sheet. Bio-Pharm argues that it is entitled to summary
judgment because no contract was ever formed after the Term Sheet. (This argument
is offered in the alternative to Bio-Pharm's contention that a contract exists that Antrim
repudiated.) Antrim argues that a reasonable jury could find that a contract existed,
under which (1) Bio-Pharm would manufacture the products for regulatory and
commercial use and be compensated for its manufacturing costs upon sale of the
products, (2) Bio-Pharm would obtain 25 percent of net profits for the life of the drug, (3)
Bio-Pharm would sell the manufactured pharmaceuticals to Antrim at the cost of
production plus ten percent, and (4) Antrim would market the drugs. See D.E. 82, Pl.'s
Ex. 1 at 144-45 (Tambi Dep.) (describing the terms of the purported agreement). Antrim
also argues that a reasonable jury could find that the contract did not include a term
9
under which Bio-Pharm would obtain an equity interest in the products. Id. at 245-46.
It is not entirely clear whether Antrim seeks to prove the existence of an express,
oral contract or an implied contract. "The [ ] difference between an express contract
and an implied contract is the mode of proof. An express contract is proven by an
actual agreement or by the expressed words used by the parties. An implied contract is
proven by circumstances showing that the parties intended to contract . . . ." In re
Brumshagen's Estate, 27 Ill. App. 2d 14, 23, 169 N.E.2d 112, 116-17 (1960). The Court
will review the evidence that supports each of these theories.
1.
Express contract
First, Antrim provides the deposition testimony of Tambi to support the existence
of an express, oral contract. During his deposition, Tambi stated that an oral contract
between Antrim and Bio-Pharm was formed with the following terms: (1) Bio-Pharm
would manufacture the pharmaceuticals and obtain reimbursement for its costs from the
net profits, (2) Bio-Pharm would obtain 25 percent of net profits, (3) the price at which
Bio-Pharm would sell the products to Antrim was the cost of production, plus ten
percent, and (4) Antrim would market the drugs. D.E. 82, Pl.'s Ex. 1 at 144-45. Finally,
Tambi also stated that Shah "understood" that Bio-Pharm did not have any equity in the
drugs, because "[t]here are a number of telephone calls where that was acknowledged."
Id. at 245. Tambi was "very positive" that Shah understood Bio-Pharm did not have any
equity in the products. Id. at 246.
Bio-Pharm identified a number of other statements in which Tambi was more
equivocal about the absence of an agreement to give Bio-Pharm equity. See id. at 110
("Q: I am asking whether you recall whether Amit ever said in his own words that he
10
understood Bio-Pharm did not have an equity ownership position in Escitalopram. A:
My understanding to that: He may have."). But when considered on a motion for
summary judgment, with all inferences taken in favor of a non-moving party, Tambi's
deposition testimony was not so equivocal that no reasonable jury could find that an oral
contract was formed in the way that Tambi described.
2.
Implied contract
Antrim also introduces evidence to support a claim of an implied contract. A
contract "may be . . . implied when it is inferred from the acts or conduct of the parties
instead of their spoken words." In re Brumshagen's Estate, 27 Ill. App. 2d at 23, 169
N.E.2d at 116-17. For each term of the purported contract, Antrim has introduced
evidence of the parties' conduct that supports its existence.
First, a reasonable jury could conclude, based on the parties' conduct, that they
agreed that Bio-Pharm would manufacture the products for regulatory and commercial
use and would be compensated for its manufacturing costs upon sale of the products.
Antrim introduced the letter from the FDA approving its escitalopram ANDA, in which
the FDA lists Bio-Pharm as the manufacturer. D.E. 66, Pl.'s Ex. 8 at Antrim 0003140
(regulatory letter approving ANDA). This letter supports a contention that Bio-Pharm
had agreed to manufacture the samples that the FDA analyzed in the ANDA. See also
D.E. 82, Pl.'s Ex. 3 at 283 (Shah Dep.).
Next, Antrim has also introduced evidence that the parties acted consistently with
the existence of the alleged profit-sharing term of the contract. For instance, in a March
2012 e-mail, Shah told Tambi that "we would like to have more of an association than
just a product partnership/nominal profit share etc." Id., Pl.'s Ex. 2 at Antrim 0002557.
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One could reasonably infer from this that Shah and Tambi had agreed to a profitsharing arrangement and that Shah was trying to change that term. Indeed, in
response, Tambi stated "we agreed to a 20% Share in the Net Profit of each product
BioPharm manufactures." Id. at Antrim 0002556. The parties continued to work
together after this e-mail exchange. A reasonable jury could conclude that the conduct
of the parties implies the existence of an agreement in which Bio-Pharm would share in
the profits of the products sold.
As to the third term—the price of the goods—a reasonable jury could also find
that the conduct of the parties implies an agreement on price. In at least two e-mails,
Tambi mentioned that the price of the goods would be calculated as the cost plus ten
percent, to which Shah either assented, id., Pl.'s Ex. 10 at BIO-PHARM 000399 (Nov.
25, 2015 Shah e-mail to Tambi), or did not object. Id., Pl.'s Ex. 5 at Antrim 0000999
(July 23, 2015 Shah e-mail to Tambi). A reasonable jury could infer that, because both
Tambi and Shah exchanged e-mails that referenced this formula, the parties had
agreed that the formula would be used to calculate the price.
Bio-Pharm argues that there was no agreement on price, because Antrim's
expert used $4 as the unit cost for escitalopram in his expert report, whereas Bio-Pharm
contends the proper unit cost was $6.78. Bio-Pharm also argues that because the
expert report relies on a price different from the term it views as the proper price, the
report must be excluded. The Court overrules both arguments for the same reason:
there is evidence that the parties agreed on a formula for calculating price, even if not
on a specific dollar amount.
Antrim also argues that the Court should exclude Shah's affidavit because it
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contradicts his prior deposition testimony about the price term. See Bank of Ill. v. Allied
Signal Safety Restraint Sys., 75 F.3d 1162, 1168 (7th Cir. 1996) (a party cannot submit
an affidavit that (1) contradicts a prior deposition to (2) create a "sham" dispute of fact).
But these statements can be reconciled, as Shah's testimony that the parties agreed on
how to calculate price, D.E. 66, Pl.'s Ex. 7 at 219-20, does not contradict his later
declaration that the parties did not agree that $6.78 per bottle was the correct price.
D.E. 77, Def.'s Ex. 6 at 4. Additionally, Shah's affidavit does not create a "sham" issue
of fact. The parties did dispute whether $6.78 was the proper cost per unit, even if a
reasonable jury could conclude that the parties agreed on how to calculate the cost.
The Court concludes that a reasonable jury could find from the conduct of the parties
that they reached an agreement on price.
Likewise, a reasonable jury could conclude that the parties' conduct indicated
agreement on Antrim's marketing responsibilities. For instance, the Term Sheet
indicated each of Antrim's responsibilities, D.E. 77, Def.'s Ex. 2 at Antrim 0002332, and
Antrim acted on those responsibilities by pursuing a distribution agreement with Leading
Pharmaceuticals. D.E. 82, Pl.'s Ex. 44 (distribution agreement).
Finally, Antrim has introduced evidence of the parties' conduct sufficient to permit
a reasonable jury to find that the parties agreed that Bio-Pharm would not get equity in
return for its manufacture of the products but instead would get a share of the profits. In
support of this proposition, Antrim notes that Shah e-mailed Tambi in August 2012 to
state that Bio-Pharm "showed our interest in receiving some type of equity
investment/committment [sic] . . . ." Id., Pl.'s Ex. 34 at Antrim 0002551. As indicated
earlier, this suggests that Bio-Pharm was interested in changing the agreement's terms
13
to obtain an equity stake but had previously agreed to proceed without that. In further
support of this inference is a January 2013 e-mail exchange. On January 11, Shah emailed Tambi: "We feel for the level of work we are putting in to the project during the
development and eventual commercialization we would like to have a larger share in the
product." D.E. 77, Def.'s Ex. 8 at Antrim 0001954. Tambi responded on January 12,
stating "I regret I cannot change the Terms we agreed unless there is something
patently unfair. As I countered on the Phone, Amit, I do not find this to be the case. I
have been subjected to this type of post-Agreement suggestions by Companies in India
and I have recinded [sic] the Agreements." Id. After this January 2013 exchange, the
parties continued to work together until 2016. These e-mails support a reasonable
inference that an agreement preexisted the e-mails and the parties had agreed that BioPharm would not obtain an equity share in the pharmaceuticals.
A reasonable jury could infer that in seeking an equity share, Shah was trying to
change the terms of an existing agreement, rather than trying to reach agreement on a
not-yet-formed contract. For example, in a July 27, 2015 e-mail, Tambi wrote to Shah
that Bio-Pharm would receive a share of the profits, not a share of the equity, and that
Bio-Pharm had previously agreed to these terms. Id., Def.'s Ex. 4 at BIO-PHARM
0000086-87. Antrim also offers e-mails from Shah that support this inference. Shah
drafted an e-mail that was to be sent to Tambi as part of an e-mail exchange regarding
Bio-Pharm's claimed equity stake in the products. Shah forwarded the e-mail to his
father for review and stated that he wanted to "threaten" Tambi. D.E. 82, Pl.'s Ex. 10 at
BIO-PHARM 000392-95. His father stated in a separate e-mail that Tambi was a "tough
cookie to break." Id., Pl.'s Ex. 40 at BIO-PHARM 000555. A jury might reasonably infer
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from this conduct that Shah was attempting to add an equity share to an existing
contract that did not include one. The Court finds that Antrim presented evidence
sufficient to support the existence of an implied contract.
For these reasons, the Court is unpersuaded by Bio-Pharm's contention that no
reasonable jury would find an enforceable contract including the terms argued by
Antrim. Bio-Pharm notes that, when the parties attempted to reduce their agreement to
writing, every draft agreement Shah offered included an equity stake. Bio-Pharm also
relies on e-mails to show that the parties had not concluded an agreement as of
January 2013, May 2014, or June 2015, as they were still exchanging proposals for a
written agreement. But the absence of a final writing does not mean that there can be
no enforceable contract. Tambi testifies that these e-mails arose in a context in which
the parties had already orally agreed over phone calls to the terms of an agreement. A
reasonable jury could conclude that Bio-Pharm assented to an arrangement in which it
did not have an equity stake, even though it kept trying to add an equity share after the
fact.
Taken together, the e-mails and Tambi's deposition testimony provide an
adequate foundation for a reasonable jury to conclude that the parties had an
enforceable agreement, express or implied. Accordingly, Bio-Pharm is not entitled to
summary judgment on this ground.
B.
Damages
Bio-Pharm argues that Antrim cannot obtain damages, because, even if BioPharm had properly delivered the products, regulations barred Antrim from selling either
ondansetron or escitalopram. "[T]he party requesting damages must show causation . .
15
. [or] that the alleged breach is the cause of those damages, with reasonable certainty."
TAS Distrib. Co. v. Cummins Engine Co., 491 F.3d 625, 633 (7th Cir. 2007). First, BioPharm contends that Antrim cannot obtain damages relating to ondansetron: because
the FDA never approved the ondansetron ANDA, Antrim could not have lawfully sold
the product, even if Bio-Pharm had produced it. Second, Bio-Pharm argues that Antrim
cannot obtain damages relating to escitalopram. Even though Antrim's ANDA
escitalopram was approved, Bio-Pharm contends that Antrim was not licensed to
directly market pharmaceuticals and had not obtained an agreement with a third party
marketer. Because no agreement was formed, Bio-Pharm argues, Antrim could not
distribute the escitalopram Bio-Pharm withheld and thus suffered no damages.
1.
Ondansetron
First, Bio-Pharm argues that it could not have caused Antrim any recoverable
damages with respect to lost profits for ondansetron because the FDA never approved
the ondansetron ANDA. A company that wishes to market a drug must obtain
government approval through a successful ANDA. See D.E. 66, Pl.'s Ex. 9 (example of
an ANDA). Antrim concedes that the FDA never approved its ondansetron ANDA.
To prevail on a breach of contract claim, a plaintiff must establish both that the
defendant breached a contract and that an injury resulted from the breach. Hess v.
Kanoski & Assocs., 668 F.3d 446, 452 (7th Cir. 2012) (citing Henderson-Smith &
Assoc., Inc. v. Nahamani Family Serv. Ctr., Inc., 323 Ill. App. 3d 15, 27, 752 N.E.2d 33,
43 (2001)). Antrim's failure to obtain approval of an ANDA for ondansetron means that
it was not authorized to market the ondansetron that Bio-Pharm produced. Thus no
injury could have resulted from Bio-Pharm's purported breach of the agreement with
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respect to that product.
Antrim argues that as a result of Bio-Pharm's refusal to ship the product, Antrim
must restart the ANDA process for ondansetron, which will delay its ability to sell the
product in the future. But this theory of damages assumes that the FDA would have
approved Antrim's ondansetron ANDA but for Bio-Pharm's purported breach and that
the FDA will approve Antrim's ondansetron ANDA once it re-applies. Both of these
points are speculative. Accordingly, Antrim has not "demonstrat[ed] actual damage," as
required to sustain a claim for breach of contract. TAS Distrib. Co., 491 F.3d at 631.
The Court concludes Bio-Pharm is entitled to summary judgment on Bio-Pharm's
breach of contract claim pertaining to ondansetron.
2.
Escitalopram
Bio-Pharm also argues that Antrim suffered no damages with regard to
escitalopram because it never reached an agreement with any entity licensed to
distribute the product. The parties agree that Antrim needed a third party to distribute
the product on its behalf. They dispute, however, whether Antrim had an agreement
with a third party to distribute escitalopram. Antrim argues it had a distribution
agreement with Leading Pharmaceuticals, a licensed entity. D.E. 82, Pl.'s Ex. 44
(distribution agreement). Tambi testified that Antrim entered into an agreement with
Leading Pharmaceuticals to distribute the escitalopram that Bio-Pharm manufactured.
Id., Pl.'s Ex. 1 at 44. Antrim also offers a January 5, 2016 e-mail that Brian Shapiro, an
employee of Leading Pharmaceuticals, sent to Tambi and Shah, stating that "[the]
agreements are simply awaiting signature by Antrim." Id., Pl.'s Ex. 16 at LEADING00000575. Antrim argues the agreements were not finalized only because, on January
17
6, Tambi e-mailed Shapiro with "bad news": Bio-Pharm had withheld the escitalopram
as a result of the dispute over the equity share. Id., Pl.'s Ex. 20 at LEADING-00001990.
Bio-Pharm disputes this contention. It cites the deposition testimony of Shapiro,
the Rule 30(b)(6) witness for Leading Pharmaceuticals. Shapiro testified that Leading
Pharmaceuticals was not prepared to distribute escitalopram on Antrim's behalf: "We
never reached a point to allow that to happen, the shipment. You know you can't ship
without an audit, you can't ship without a purchase order, so none of those things ever
took place because we never got to the execution point of the agreement." D.E. 77,
Def.'s Ex. 14 at 20. Shapiro also stated that it could not distribute on Antrim's behalf,
because Leading Pharmaceuticals did not have access to the final unit costs of
escitalopram or the amount to be sold. Id. at 64-65.
A reasonable jury could conclude that the barriers to an agreement with Leading
Pharmaceuticals that Bio-Pharm has identified exist only because Antrim and Leading
stopped moving towards an agreement once it became apparent that Bio-Pharm would
withhold the escitalopram. The Court declines to grant summary judgment on this
ground, because a reasonable jury, taking all inferences in Antrim's favor, could
conclude that Leading Pharmaceuticals and Antrim would have had a final agreement,
but for Bio-Pharm's decision not to ship the escitalopram.
Antrim also argues it had a relationship with another third-party seller, RxTPL,
but the Court does not need to resolve the status of this relationship, as Antrim has
presented adequate evidence of a relationship with Leading Pharmaceuticals to defeat
Bio-Pharm's motion.
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C.
New business rule
Bio-Pharm's third argument for summary judgment is that, under the so-called
new business rule, Illinois law does not permit Antrim to recover lost profits. "The
general rule under Illinois law is that a new business has no right to recover lost profits."
TAS Distrib. Co., 491 F.3d at 634. The rationale is that new businesses have no history
of profits, so any lost profits damages would be speculative. Id. at 633-34. The rule,
however, is not "inviolate." Tri-G, Inc. v. Burke, Bosselman & Weaver, 222 Ill. 2d 218,
249, 856 N.E.2d 389, 407 (2006). Illinois courts applying the new business rule permit
an exception if a plaintiff offers expert testimony featuring "convincing and nonspeculative evidence sufficient to prove lost profits." TAS Distrib. Co., 491 F.3d at 633.
In Milex Products, Inc. v. Alra Laboratories, Inc., 237 Ill. App. 3d 177, 603 N.E.2d
1226 (1992), the Illinois appellate court allowed a new business to pursue lost profits
because the loss could be proved to a "reasonable degree of certainty" by "proof [that]
was neither speculative nor the product of conjecture." Id. at 193, 603 N.E.2d at 1237.
Milex, a company that wished to produce a generic version of a fertility drug, entered
into an agreement with a pharmaceutical contract manufacturer. Id. at 179-80, 603
N.E.2d at 1228. Milex had not previously entered the pharmaceutical industry. Id. at
179, 603 N.E.2d at 1228. Milex later sued its manufacturer for breach of contract after
the manufacturer insisted on terms different from the purported original terms. Id. Milex
introduced expert testimony regarding the profits it contended it lost from the
defendant's purported breach. The expert considered the price of the pharmaceuticals,
the total number of prescriptions in the market, and the average size of a prescription.
Id. at 184-85, 603 N.E.2d at 1231-32. He also used data from IMS, "the largest data
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collection and information business in the pharmaceutical industry." Id. at 184, 603
N.E.2d at 1231. The Illinois appellate court concluded that the Milex expert provided
credible testimony, which provided "a reasonable degree of certainty," so the new
business rule did not bar Milex from pursuing lost profits. Id. at 193, 603 N.E.2d at
1237.
Antrim has presented the expert testimony of Sean Brynjelsen in support of its
claim for lost profits. D.E. 82, Pl.'s Ex. 25 at 5, App. C (Brynjelsen Expert Rep.).
Brynjelsen's testimony is quite similar to the expert testimony discussed in Milex. In his
report, Brynjelsen states that, to reach an opinion on lost profits, he considered the
average price of escitalopram, the total volume of escitalopram sales in the market, and
the estimated number of units that Antrim would sell. Id. Like the expert in Milex,
Brynjelsen also relied upon IMS data. Id. at 4. For the same reasons described in
Milex, the Court concludes that Antrim has offered evidence sufficient to establish a lost
profits estimate with "a reasonable degree of certainty," and thus the new business rule
does not bar its lost profits claim.
Bio-Pharm argues that lost profits cannot be reasonably predicted because the
corporate organization of Antrim renders it unlike the other companies that Brynjelsen
relied upon in his expert report. Bio-Pharm contends that Tambi describes Antrim as a
"virtual business," which is unlike the other pharmaceutical companies that Brynjelsen
analyzed. The Court finds this argument unpersuasive. This point may bear on the
weight to be given to Brynjelsen's testimony, but it does not support its exclusion or
suggest that the testimony is insufficient as a matter of law to support Antrim's lost
profits claim. Nothing in Milex suggests that the sort of identity of structure or
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functioning that Bio-Pharm advocates is required. The relevant comparison in Milex is
between the plaintiff's claimed lost profits and the profits of other similar businesses,
using "actual products in the marketplace as well as authoritative sources for the data
[that the expert] used." Milex, 237 Ill. App. 3d at 192, 603 N.E.2d at 1236. Bio-Pharm
has not established that Antrim's supposed status as a "virtual company" undermines
the validity of the comparison that Brynjelsen performed.
For this reason, the Court finds unconvincing Bio-Pharm's reliance upon Kinesoft
Development Corp. v. Softbank Holdings Inc., 139 F. Supp. 2d 869 (N.D. Ill. 2001). In
Kinesoft, the court concluded that Milex was inapplicable to a business that
unsuccessfully produced PC games, as the PC game industry was "hit driven," meaning
that some games did very well while others did not, and companies must find a
"formula" to repeatedly produce successful games. Id. at 887. The plaintiff's expert,
considering a new business that never issued a product, was thus unable to base his
profit projections on a "comparable company selling comparable games." Id. at 888,
910. Bio-Pharm offers nothing to suggest that pharmaceutical companies similarly need
to find a unique approach to obtain success in the generic pharmaceuticals market.
Indeed, the pharmaceutical products at issue are, by definition, generic; they are the
opposite of a "hit driven" product.
The Court concludes that Antrim has presented expert evidence that satisfies the
Milex standard and declines Bio-Pharm's motion for summary judgment.
D.
Failure to mitigate
Bio-Pharm next argues that it is entitled to partial summary judgment on Antrim's
breach of contract claim, as Antrim failed to mitigate its damages. "[A]n injured party
21
has an obligation to take reasonable steps to minimize his damages and thus avoid
heaping up additional losses for which the tortfeasor may be held liable." Toledo Peoria
& W. Ry. v. Metro Waste Sys., Inc., 59 F.3d 637, 640 (7th Cir. 1995) (citations omitted).
Bio-Pharm argues that Antrim did not need more than a year to find another contract
manufacturer to replace it, so it should not be permitted to obtain damages for any
injuries beyond one year after the purported breach.
The process of obtaining a new manufacturer and FDA approval for the change
in manufacturing is known as a "site change." Bio-Pharm contends that Antrim could
complete a site change in approximately a year. In support of its contention, Bio-Pharm
has introduced the expert testimony of Mark Schwartz. 2 D.E. 66, Pl.'s Ex. 3 (Schwartz
Expert Rep.). Schwartz characterized the site change as a six-step process: (1) find a
new contract manufacturer, which should take no more than two months; (2) source
materials to manufacture the drug, which should take no more than two months; (3)
submit additional regulatory documentation, which should take no more than "a couple
of days"; (4) prove to the FDA that the manufacturing process is reliable, which should
take no more than a month; (5) provide information on the stability of the drugs, which
takes about six months; and (6) submit a supplemental document, known as a CBE-30,
which should take no more than a month. Id. at 4-7.
The length of two steps in this process—finding a new manufacturer and
submitting supplemental documents to the FDA—are the source of particular dispute
between the parties. First, Bio-Pharm and Antrim dispute the amount of time it takes to
2
Antrim challenges the admissibility of Schwartz's testimony in its Local Rule 56.1
statement, but its argument is insufficiently developed to preserve the point for purposes
of the present motions.
22
find a new contract manufacturer. Bio-Pharm offers Schwartz's expert report, in which
he notes that Tambi testified that finding a new manufacturer would take a month, id. at
4 n.4, and opines it would take approximately two months. Id. at 4. But Schwartz's
report mischaracterizes Tambi's testimony, the relevant excerpt of which is as follows:
A. . . . [W]e are still trying to get a company to – that we can trust. You can
get companies to market – to manufacture this. There are tons of
companies, but can you trust these guys.
Q. How long does it usually take to find a good manufacturer?
A. It's difficult to find a good manufacturer. As I'm saying you can find a
manufacturer.
Q. Well, setting aside the trust issue, which I understand, but, I mean, just
if you were to – you were looking for any manufacturer to manufacture a
product, how long do you think that would take?
A. Oh, it would take about a month.
D.E. 82, Pl.'s Ex. 1 at 174-75 (Tambi Dep.) (emphasis added). In short, Tambi did not
concede that it would take a month to find a replacement contract manufacturer; he said
it would take a month to find a replacement if he did not try to confirm that the
manufacturer could be trusted. Tambi also stated that many pharmaceutical companies
in India had been closed after failing to comply with FDA regulations. Id. at 299-300. A
reasonable jury faced with Schwartz's expert opinion (which may be based in part on a
miscitation of Tambi's deposition testimony) and Tambi's own testimony (which
describes potentially significant issues in finding a trustworthy manufacturer in India)
could conclude that the process takes more than the two months that Bio-Pharm
contends.
Additionally, Bio-Pharm and Antrim dispute the amount of time that it would take
for Antrim to complete the sixth step, updating the FDA on the change in manufacturers.
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Bio-Pharm contends that this process could be completed in approximately one month
through the use of a regulatory document known as a CBE-30. Schwartz opined that
the FDA would require the CBE-30, not the more involved prior approval supplement
(PAS), which takes longer to complete. D.E. 66, Pl.'s Ex. 3 at 7 n.13. But, as the expert
report states, a PAS could be required in a number of situations: if the new
manufacturer had never produced escitalopram; if the manufacturer had discontinued
escitalopram production for more than two years; if the manufacturer lacked an FDA
certificate of good standing; or if the replacement manufacturer would use a different
process from the previous manufacturer. Id. From the record, the Court cannot
determine definitively how long a PAS takes to complete, but it appears evident that it is
longer than the process for a CBE-30. In short, it is not clear that Antrim would have
been able to avail itself of the expedited CBE-30 process. (Bio-Pharm attempts to
argue that Antrim agreed that it was eligible for a CBE-30 in a response to a request to
admit, but the Court reads Antrim's answer as affirming that the CBE-30 was an
available channel, not the definitive channel it could employ. Antrim LR 56.1 Resp.
Stmt. ¶ 70.)
The record shows that a reasonable jury could find that it would take Antrim more
than two months to locate a new manufacturer and more than one month to obtain FDA
approval for the change in manufacturer. For these reasons, the Court concludes that
Bio-Pharm is not entitled to summary judgment, as a reasonable jury could find that
Antrim reasonably would have taken longer than one year to mitigate its losses.
E.
Unjust enrichment
Bio-Pharm urges the Court to grant summary judgment on Antrim's unjust
24
enrichment claim, because there is no evidence that Bio-Pharm benefited by retaining
the medications. "[U]njust enrichment does not seek to compensate a plaintiff for loss
or damages suffered but seeks to disgorge a benefit that the defendant unjustly retains."
Blythe Holdings, Inc. v. DeAngelis, 750 F.3d 653, 658 (7th Cir. 2014) (citation omitted).
Bio-Pharm argues that Antrim has failed to show what benefit Bio-Pharm derived by
withholding the escitalopram.
The Court agrees. First, Antrim has offered no evidence or case law to support
the proposition that withholding a shipment is sufficient to establish an unjust
enrichment claim. Second, though Antrim argues that Bio-Pharm unjustly benefited by
selling the withheld products through other channels, no reasonable jury could find in
Antrim's favor on this point. Antrim cites to "Shah Ex. 17," which the Court construes as
D.E. 77, Def.'s Ex. 17. That exhibit consists of a chain of e-mails from 2014 that
predate Bio-Pharm's decision to withhold the escitalopram; it is unclear what relevance
they have on this issue. The only other "Exhibit 17," D.E. 82, Pl.'s Ex. 17, is an e-mail
from Shapiro, the Leading Pharmaceuticals employee, which also does not support
Antrim's contention on this point. Antrim also cites to a July 2016 e-mail chain between
Shah and an unidentified third party, Mayur Khamar, see D.E. 82, Pl.'s Ex. 31 at BIOPHARM 021842, but these e-mails lack any context and, standing alone, they do not
show that Bio-Pharm is unjustly benefitting from the retention of the products. Id. No
reasonable jury could conclude from this evidence that Bio-Pharm was unjustly enriched
by withholding the products. Bio-Pharm is entitled to summary judgment on this claim.
Conclusion
For the foregoing reasons, the Court denies Antrim's motion for summary
25
judgment [dkt. no. 63]. The court grants Bio-Pharm's motion for summary judgment on
Antrim's unjust enrichment claim (count 3 of Antrim's complaint), partially grants the
motion on Antrim's breach of contract claim (count 1) to the extent the claim applies to
ondansetron, and otherwise denies the motion [dkt. no. 75]. The case is set for a status
hearing on April 24, 2018 at 9:30 a.m. to set a trial date and discuss the possibility of
settlement.
________________________________
MATTHEW F. KENNELLY
United States District Judge
Date: April 19, 2018
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