251 F. Supp. 3d 317
D. Mass.2017Background
- Terumo acquired Harvest in April 2011 under a merger agreement that included a commitment to "use Commercially Reasonable Efforts to effectuate and fund the CLI Development Plan with a commitment to provide up to $6,000,000 in funding for the CLI Development Plan."
- The CLI Pivotal Clinical Trial was under contract research organization InVentiv; enrollment was far below the anticipated 210 patients and the study ultimately failed to meet primary endpoints.
- Terumo reported aggregate CLI-related expenditures exceeding $6,000,000 (including third‑party vendors, payroll and travel), and thereafter treated the $6 million figure as a cap on its funding obligation.
- Tureski, as Sellers’ Representative and Plan Manager, sued in counterclaims alleging (1) breach for failing to use Commercially Reasonable Efforts/fund the Plan, (2) breach for withholding requested information, (3) a declaratory judgment that Terumo violated the Agreement entitling Sellers to additional milestone payments, and (4) specific performance to compel document production.
- The court previously held the Agreement’s “up to $6,000,000” language limits Terumo’s financial obligation and that Tureski could still argue Terumo breached its obligation prior to hitting the cap.
- On summary judgment the court concluded the term “funding” is unambiguous in context and includes the types of expenditures Terumo counted; Tureski failed to show breach or damages, and Terumo’s motion for summary judgment on all counterclaims was granted.
Issues
| Issue | Plaintiff's Argument (Tureski) | Defendant's Argument (Terumo) | Held |
|---|---|---|---|
| Meaning of "funding" in the $6,000,000 commitment | "Funding" should exclude Harvest internal salaries, travel, SG&A and be limited to four narrow categories (per‑patient site payments, third‑party monitoring/analytics, CMS consulting, costs for two named doctors). | "Funding" means monies/financial resources expended for the CLI Development Plan generally, including third‑party vendors and internal payroll/travel tied to the trial. | Court: "Funding" is unambiguous in context and embraces the broad, dictionary meaning—Terumo’s inclusion of third‑party and internal expenditures toward the $6M cap was proper. |
| Whether Terumo breached by exceeding the $6M cap or mis‑calculating costs | Terumo improperly included costs so that it did not actually satisfy the $6M funding obligation; thus it breached and Sellers are entitled to additional milestone payments. | Terumo’s accounting showing >$6M in CLI expenditures satisfies and triggers the cap; Tureski does not dispute Terumo’s calculations in the record. | Court: No genuine dispute that Terumo reached the cap; because "funding" was properly interpreted and Tureski did not contest the cost calculations, no breach shown. |
| Whether Terumo failed to use the required level of "Commercially Reasonable Efforts" (i.e., effort comparable to internally developed products) | Terumo did not expend the same level of effort/resources as it uses internally on comparable products and sidelined the Plan Manager. | The counterclaim did not properly allege comparative‑effort facts; evidence cited by Tureski was not properly before the court or was insufficient to show comparative effort or resulting damages. | Court: Tureski failed to present admissible record evidence to create a triable issue on the comparative effort standard; summary judgment for Terumo. |
| Whether Terumo breached obligations to provide documents/information and whether specific performance or damages are available | Terumo refused to produce required annual financials and trial materials, denying the Sellers’ Representative access and triggering remedies (including possible payment acceleration). | Terumo produced documents in litigation; Tureski did not show he gave required written notice to trigger the Agreement’s cure period/payment‑acceleration remedy, and he did not identify damages or need for ongoing specific performance. | Court: Even if a breach occurred, Tureski failed to show damages or satisfy the written‑notice requirement for payment acceleration; specific performance claims are moot or unsupported. |
Key Cases Cited
- In re Viking Pump, 148 A.3d 633 (Del. 2016) (contract interpreted from four corners; give effect to all provisions)
- Lorillard Tobacco Co. v. American Legacy Foundation, 903 A.2d 728 (Del. 2006) (use of dictionary definitions for undefined contract terms)
- Eagle Industries, Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228 (Del. 1997) (extrinsic evidence cannot vary unambiguous contract terms)
- Matulich v. Aegis Communications Group, Inc., 942 A.2d 596 (Del. 2008) (a term is not ambiguous merely because parties disagree)
- Seaford Golf & Country Club v. E.I. duPont de Nemours & Co., 925 A.2d 1255 (Del. 2007) (ambiguity exists when dictionary definitions support competing reasonable interpretations)