Bausch & Lomb Incorporated v. Sarfarazi

Filing 82

ORDER granting in part and denying in part 78 Motion for Partial Summary Judgment. Signed by Hon. Michael A. Telesca on July 31, 2013. (MES)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
________________________________________
BAUSCH & LOMB INCORPORATED,
Plaintiff,

09-CV-6041
DECISION AND ORDER

v.
FAEZEH MONA SARFARAZI, M.D.
Defendant,
________________________________________
INTRODUCTION

Plaintiff, Bausch & Lomb Incorporated (“Plaintiff” or “B&L”),
brings this action seeking, inter alia, a declaratory judgment that
it did not breach a license agreement with the Defendant, Faezeh
Mona Sarfarazi, M.D. (“Defendant” or “Sarfarazi”), for the license
of intellectual property owned by Sarfarazi. (Docket No. 1.)
Sarfarazi answered the complaint and asserted four counterclaims
for breach of contract based on B&L’s alleged failure to use
commercially reasonable efforts to develop an intraocular lens with
the use of Sarfarazi’s intellectual property, which was the purpose
of the license agreement; B&L’s breach of its obligations after the
termination

of

the

agreement;

unfair

competition

and/or

misappropriation of ideas; and for the correction of a patent
application filed by B&L to list Sarfarazi as the inventor. (Docket
No.

12.)

In

Interrogatories,

her

Response

Sarfarazi

to

alleged

Plaintiff’s
that

“[she]

First
has

Set

of

suffered

consequential damages based upon her lens' diminution in value as
a result of B&L's conduct. With the flawed clinical trials, her
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intraocular lens has suffered damage to its reputation in the
marketplace.” (Docket No. 78-2 at 15.)
B&L

now

moves

for

partial

summary

judgment

to

dismiss

Sarfarazi’s claims for reputational harm as speculative and to
dismiss Sarfarazi’s claim for breach of contract based on B&L’s
alleged failure to use commercially reasonable efforts to develop
the product. Def. Mem. of Law at 1-2, Docket No. 78-19. The motion
is unopposed. For the reasons discussed herein, the Court grants in
part and denies in part Plaintiff’s motion for partial summary
judgment.

Defendant’s damages claim for reputational harm is

dismissed, but the motion is denied with respect to Defendant’s
claim for breach of contract.
BACKGROUND
The following facts are taken from Plaintiff’s submission
pursuant to Local Rule 56 (a)(1) and the accompanying exhibits.
Defendant has not responded to the instant motion or Plaintiff’s
Local Rule 56 Statement of Facts.

Therefore, the facts contained

in the Defendant’s Local Rule 56 Statement of Facts are deemed
admitted. See Local Rule of Civ. P. 56 (a)(2).

However, the Court

has reviewed the entire record to determine whether there are any
disputed issues of fact.
On July 18, 2003, B&L and Sarfarazi entered into a license
agreement (“the Agreement”) for the development of an intraocular
lens, invented by Sarfarazi, for the treatment of the eye condition

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presbyopia. Pl. Statement of Facts at ¶1; Foos Aff. at ¶6. Pursuant
to the Agreement, Sarfarazi received an initial payment of $2.5
million upon execution of the Agreement and additional payments as
B&L hit certain milestones in the development of the lens.

In

total, Sarfarazi received $9.5 million under the Agreement. Pl.
Statement of Facts at ¶¶ 10-11, 24.
The Agreement required B&L to “use reasonable commercial
efforts to achieve the development milestones” set forth in the
Agreement and to develop the licensed product for sale.

License

Agreement §7(a), Docket No. 78-7 at 11. The Agreement also required
B&L to incur all costs related to the development of the lens. Id.
The Agreement states that “B&L may, from time to time, consult or
confer with [Sarfarazi] with regard to development of Licensed
Product...but B&L shall have complete control and authority over
the development of Licensed Products.” Id.

B&L was required to

provide monthly reports until the “first commercial sale” and to
meet with Sarfarazi quarterly during the first three years of
development and later every six months. License Agreement §7(d),
Docket No. 78-7 at 11-12.

B&L also agreed to provide Sarfarazi

with certain reports concerning the development of the product,
including clinical trials. Id.
B&L began its development of the lens in 2003, at a time when
no other similar lens existed on the market. Foos Aff. ¶11.

It was

unclear whether the lens could be developed safely and effectively

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or whether B&L could gain the necessary regulatory approvals. Id.
Nevertheless, B&L, inter alia, developed a unique manufacturing
process for the lens, conducted clinical trials, developed surgical
techniques for the lens and implanted the lens in 76 patients.
Id. at ¶12.

However, after three years of development, B&L

concluded that the lens provided limited improvement in patients
with

presbyopia

and

that

it

carried

with

it

concerns, including infection. Id. at ¶ 25-29.

certain

safety

B&L sent Sarfarazi

periodic updates relating to the development of the lens and the
clinical trials, and Sarfarazi visited the clinical trial sites in
Mexico and India. Foos Aff. at ¶¶ 15-18; Sarfarazi Dep. at pg. 222.
However,

on

several

occasions,

Sarfarazi with monthly reports.

B&L

failed

to

timely

provide

Foos Aff. Exhibit 4.

Then, on February 7, 2007, B&L sent a termination letter to
Sarfarazi, terminating the Agreement pursuant to Section 13(b),
which permitted B&L to terminate the Agreement upon 60 days notice
if it made a “commercially reasonable determination that there
ha[d] been a material change in...the safety and efficacy goals”
for the lens. License Agreement §13(b), Docket No. 78-7 at 17.

The

Agreement

the

then

provided

Sarfarazi

60

days

to

discuss

termination with B&L, but B&L retained the right to terminate if
its decision regarding the efficacy and/or safety of the product
had not changed during the 60 days.

The Agreement provides that if

Sarfarazi disputed B&L’s decision to terminate the Agreement, her

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sole remedy was to commence an arbitration proceeding within 90
days after the 60 day notice period. License Agreement §13(b),
Docket No. 78-7 at 17. The 90 day period was extended through
February

28,

2008,

however,

Sarfarazi

did

not

commence

an

arbitration proceeding. Pl. Statement of Facts at ¶22.
As stated, Sarfarazi was updated on a periodic basis of the
status of B&L’s development efforts and she visited two of the
clinical trial sites.
believed

they

had

Sarfarazi did not inform B&L that she

breached

the

Agreement

by

failing

to

use

commercially reasonable efforts to develop the lens prior to B&L’s
termination of the Agreement. The Agreement provides that Sarfarazi
could terminate the Agreement only if she notified B&L of a
material breach and afforded it 60 days to cure the breach.
License Agreement §13(a), Docket No. 78-7 at 16.

However, the

record

receive

indicates

that

Sarfarazi

did

not

always

the

information to which she was entitled on a timely basis and she
alleges that she did not receive reports regarding several of the
clinical trials until after termination.

Answer and Counterclaims

at ¶¶ 89-98, Docket No 12.
Following termination, Sarfarazi attempted to market the lens
to four other pharmaceutical companies, but ultimately, she decided
not to proceed with any of the companies. Sarfarazi Dep. at pg.
596-606. She states that she is “not ready” to proceed with any
company because of this pending litigation. Id. at pg. 606.

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DISCUSSION
Rule 56(a) of the Federal Rules of Civil Procedure provides
that summary judgment shall be granted “if the movant shows that
there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.” See Fed. R. Civ. P.
56(a). If,

after

considering the

evidence in

the

light

most

favorable to the nonmoving party, the court finds that no rational
jury could find in favor of that party, a grant of summary judgment
is appropriate. See Scott v. Harris, 550 U.S. 372, 379 (2007)
(citing Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475
U.S. 574, 586-587.). An unopposed motion for summary judgment may
be granted if the Court determines that the moving party met its
burden of demonstrating that there are no material issues of fact
and that it is entitled to judgment as a matter of law. See Vermont
Teddy Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 244-246
(2d Cir. 2004.)
A.

Reputational Harm

B&L moves to dismiss Sarfarazi’s damages claim for harm to the
reputation

of

the

product

based

on

B&L’s

termination

Agreement contending that it is too speculative.

of

the

This Court

agrees. Accordingly, B&L’s motion to dismiss Sarfarazi’s claim for
reputational harm is granted.
In New York, a claim for reputational harm is only cognizable
where the harm is “capable of proof with reasonable certainty” and

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is “not merely speculative, possible or imaginary.” Toltec Fabrics,
Inc. v. August Inc., 29 F.3d 778, 780-782 (2d Cir. 1994)(quoting
Kenford

Co.

v.

County

of

Erie,

67

N.Y.2d

257,

261

(1986)).

Further, a plaintiff must present proof of the amount of the loss
and establish that the loss was causally related to the breach of
contract. Id.
Here, B&L contends that Sarfarazi’s alleged reputational harm
is

too

speculative

because

she

has

not

established

that she

actually lost any particular business opportunity because of its
termination of the Agreement.

Further, they contend, the evidence

is clear that Sarfarazi rejected any business opportunity that may
have been available to her following the termination.
The

undisputed

facts

establish

that

following

B&L’s

termination of the Agreement, Sarfarazi was in contact with several
companies who may have agreed to develop the lens.

However,

Sarfarazi did not proceed with any of these companies and she
testified that she was “not ready” to further market her lens.

On

these facts, the Court concludes that any business opportunity that
Sarfarazi may have lost due to B&L’s termination of the Agreement
is too speculative for her to succeed on a claim for reputational
harm.

There is simply no proof in the record that any of the

companies with whom she spoke following B&L’s termination decided
not to proceed with her based on the termination.

To the contrary,

the facts indicate that it was Sarfarazi herself who decided to

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forgo any business opportunity she may have had.
Court

grants

B&L’s

motion

to

dismiss

Accordingly, the

Sarfarazi’s

claim

for

reputational harm.
B.

The Arbitration Clause

B&L

contends

that

Sarfarazi’s

breach

of

contract

claim

relating to their alleged failure to use commercially reasonable
efforts to develop the lens is required to be arbitrated pursuant
to Section 13(b) of the Agreement.
terminate

the

Agreement

upon

60

Section 13(b) permitted B&L to
days

notice

if

it

made

a

“commercially reasonable determination that there ha[d] been a
material change in... the safety and efficacy goals” for the lens.
License Agreement §13(b), Docket No. 78-7 at 17.

The Agreement

then provided Sarfarazi 60 days to discuss the termination with
B&L, but B&L retained the right to terminate if its decision
regarding the efficacy and/or safety of the product had not changed
during the 60 days. The Agreement provides that if Sarfarazi
disputed B&L’s decision to terminate the Agreement, her sole remedy
was to commence an arbitration proceeding within 90 days after the
60 days notice period. License Agreement §13(b), Docket No. 78-7 at
17 (emphasis added).
To determine whether a contract dispute is required to be
arbitrated, Courts distinguish between broad arbitration clauses,
which purport to cover any and all disputes, and narrow arbitration
clauses,

which

limit

the

disputes

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that

are

required

to

be

arbitrated. See McDonnell Douglas Finance Corp. v. Pennsylvania
Power & Light Co., 858 F.2d 825, 831-833 (2d Cir. 1988). Here, B&L
acknowledges that the arbitration clause is narrow in that it
limits the disputes that are required to be arbitrated to those
related to its termination of the Agreement. Pl. Mem. of Law at 21.
However, they contend that Sarfarazi’s claim for breach of contract
is “inextricably tied to” or “wholly derivative of” her claim that
they improperly terminated the Agreement. Pl. Mem. of Law at 21
(citing McAllister Bros., Inc. v. A&S Transp. Co., 621 F.2d 519,
523 2d Cir. 1980).

This Court disagrees.

Sarfarazi alleges that B&L mismanaged clinical trials which
resulted in

B&L

failing

to

meet

the

efficacy goals” under the Agreement.

“anticipated

safety

and

She alleges specific errors

or lapses in protocols during the trials that led to the alleged
mismanagement and that the reports she received regarding the
clinical trials, some of which were received after B&L terminated
the

Agreement,

followed.

establish

that

the

proper

protocols

were

not

See Answer and Counterclaims at ¶¶ 77-98. While the

Court can infer from Sarfarazi’s Answer and Counterclaims that she
ultimately wanted the project to continue and that she believed
that it would have continued had these alleged errors not occurred,
her claim that B&L failed to use commercially reasonable efforts to
develop

the

product

is

wholly

separate

from

B&L’s

purported

commercially reasonable determination that the Agreement should be

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terminated because the safety and efficacy goals could not be met
under Section 13(b). This is underscored by the fact that the
Agreement contains two separate provisions dealing with B&L’s
obligations to use commercially reasonable efforts to develop the
product under Section 7(a) and to make a commercially reasonable
determination that termination was proper under Section 13(b).
Should the parties have desired to arbitrate the issue of whether
B&L used commercially reasonable efforts to develop the product,
they could have done so. However, the plain language of the
contract limits the applicability of the arbitration clause to a
dispute regarding termination. See License Agreement §13(b) (“If
B&L does not alter its determination [regarding termination]...and
Licensor disputes that B&L has made a commercially reasonable
determination [regarding termination]..., then Licensor, as her
sole remedy therefor, may commence an arbitration proceeding...”);
Docket No. 78-7 at 16.
The Court finds that Sarfarazi’s claim for breach of contract
is not related to B&L’s decision to terminate the contract. It is
a claim that they breached the terms of the contract prior to
termination.

While Sarfarazi’s counterclaim may suggest that she

wished B&L would have continued to develop the lens, the claim does
not dispute whether they made a commercially reasonable decision to
terminate the Agreement; rather, it disputes whether they used
commercially reasonable efforts to develop the product prior to

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termination.

While there is a federal presumption in favor of

arbitration, “it is equally clear that federal policy alone cannot
be enough to extend the application of an arbitration clause far
beyond its intended scope.” McDonnell, 858 F.2d at 831 (internal
quotations omitted). Accordingly, the Court finds that Sarfarazi’s
claim does not fall within the limited scope of the arbitration
clause.

Therefore, B&L’s motion to dismiss this claim is denied.

C.

Notice and Opportunity to Cure

B&L

contends

that

Sarfarazi’s

claim

for

breach

of

the

Agreement based on B&L’s alleged failure to use commercially
reasonable efforts to develop the lens should also be dismissed
because Sarfarazi failed to give B&L notice of the alleged breach
and an opportunity to cure.

Sarfarazi’s claim rests on her

allegation that she was not adequately informed of B&L’s progress
as required by Section 7(d) of the Agreement and therefore, she
could not make the determination of whether commercially reasonable
efforts were made to give B&L notice of the breach.

The Court

finds that B&L has not established that it is entitled to judgment
as a matter of law on this claim.

While the record reveals that

Sarfarazi was provided with information on the development of the
lens and she attended several of the clinical trials, the record
also indicates that on several occasions B&L failed to timely
inform Sarfarazi of its progress. See Foos Aff. Exhibit 4, Docket
No. 78-10. Further, Sarfarazi alleges that some of the information

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regarding certain clinical trials was not provided to her until
after B&L terminated the Agreement. Answer and Counterclaims at ¶¶
89, 94, 96.

Although Sarfarazi has not responded to the instant

motion, the Court finds that there are questions of fact that
remain as to whether Sarfarazi was adequately informed such that
she could have given B&L notice of the alleged breach and an
opportunity to cure.

Accordingly, B&L’s motion to dismiss this

claim is denied.
CONCLUSION
For the reasons discussed herein, the Court grants in part and
denies in part Plaintiff’s motion for partial summary judgment.
Defendant’s damages claim for reputational harm is dismissed, but
the motion is denied in all other respects.

ALL OF THE ABOVE IS SO ORDERED.
S/ MICHAEL A. TELESCA
HON. MICHAEL A. TELESCA
United States District Judge
Dated:

Rochester, New York
July 31, 2013

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