SIGA Technologies, Inc. v. PharmAthene, Inc.
2013 Del. LEXIS 265
| Del. | 2013Background
- PharmAthene and SIGA Technologies, both Delaware corporations, negotiated over ST-246 (an antiviral drug) around 2005–2006 amid SIGA’s financial distress.
- A term sheet (LATS) was created outlining a license framework; it was labeled non-binding but contemplated a future license with terms substantially similar to the LATS if a merger did not close.
- Bridge Loan and Merger Agreements, later entered between the parties, each included an express obligation to negotiate in good faith a definitive license agreement in accordance with the LATS terms.
- During 2006, merger discussions and a parallel licensing track evolved; SIGA faced cash needs and PharmAthene sought a license or control over ST-246, including potential merger as an option.
- SIGA later signaled changes in economic terms and structure (Draft LLC Agreement) that diverged from the LATS, while PharmAthene insisted on terms substantially similar to the LATS and its binding elements.
- In October–November 2006, PharmAthene filed suit; after trial, the court found SIGA breached the duty to negotiate in good faith and awarded equitable damages, later remanded for recalibration of damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a duty to negotiate in good faith is enforceable | PharmAthene argues the LATS bound SIGA to negotiate in good faith toward a license in accordance with its terms. | SIGA contends the LATS was nonbinding terms only and could not impose a binding good-faith negotiation duty. | Enforceable duty to negotiate in good faith existed under the agreements. |
| Whether promissory estoppel lies where a fully integrated contract governs the promise | PharmAthene asserts promissory estoppel based on SIGA’s promises for a good-faith license. | SIGA argues promissory estoppel is inappropriate where an integrated contract governs the promise. | Promissory estoppel cannot lie where an enforceable contract governs the promise. |
| Remedy for breach of a good-faith negotiation obligation | PharmAthene seeks expectation damages aligning with the license terms. | SIGA argues damages should reflect reliance or other non-expectation measures. | Where a Type II preliminary agreement exists and the court finds the parties would have reached an agreement but for bad faith, contract damages are recoverable. |
| Choice of law governing the contract and breach | Delaware law should apply to all contractual claims. | Conflicting governing laws in Bridge Loan and Merger Agreements require resolution; Merger Agreement law should control. | Delaware law applies; Merger Agreement controls due to later date and broader scope. |
Key Cases Cited
- Titan Inv. Fund II, LP v. Freedom Mortgage Corp., 58 A.3d 984 (Del. 2012) (recovery of expectation damages for breach of good-faith negotiations under Type II agreements (remand guidance))
- Venture Assocs., L.P. v. Zenith Data Systems Corp., string not provided in text (7th Cir. 1996) (bad-faith breach of negotiations; debate on remedy; majority supports potential damages for lost bargain)
- Goodstein Construction Corp. v. City of New York, 80 N.Y.2d 366, 590 N.Y.S.2d 425, 604 N.E.2d 1356 (N.Y. 1992) (NY law on good-faith negotiations; Type II binding preliminary agreements and remedies)
- Fairbrook Leasing, Inc. v. Mesaba Aviation, Inc., 519 F.3d 421 (8th Cir. 2008) (remedies for Type II binding preliminary agreements under New York law)