PharmAthene, Inc. v. SIGA Technologies, Inc., C.A. No. 2627-VCP (Del. Ch. Dec. 16, 2011), read opinion denying a motion for reargument here. The Court of Chancery’s original 117-page decision from September 2011 involving the award of damages for breach of an “agreement to negotiate in good faith” was highlighted on these pages here. Other Delaware decisions in this matter were summarized on posts available here.
The gist of this decision was to explain the doctrinal basis and justification for the wide range of discretion that a court of equity has in fashioning a customized remedy – – and clarifying why it is not bound by the more conventional rules that a court of law would be constrained by in awarding damages and determining lost profits with reasonable certainty. As a remedy for breaching the express contractual obligation to negotiate a license agreement in good faith, in its decision a few months ago, the Court awarded the following remedy: “once SIGA earns $40 million in net profits or a margin from net sales of ST-246, PharmAthene shall be entitled to 50% of all net profits from such sales thereafter for a period from entry of this judgment until the expiration of ten years following the first commercial sale of any product derived from ST-246.”
The Court determined its original remedy to be reasonable compensation for the lost expectancy of what PharmAthene would have received had a license agreement been negotiated in good faith, and was consistent with the Court’s broad discretion to form an “appropriate remedy for a particular wrong” and was necessary to provide “such relief as justice and good conscience may require.”
In addition to examining the nuances of Court of Chancery Rule 59(f), the Court distinguished the differences between waiving an argument that is not properly raised in a brief and the authority of a court of equity to fashion a remedy that may be different from what was specifically articulated by one of the parties.
The Court emphasized that it did not misapprehend the law of remedies, but to the contrary, it found the imposition of a constructive trust, and a judgment in the nature of an equitable lien in future profits, to be applicable to the circumstances of this case and was a tailored remedy necessary to redress a wrong and to prevent injustice. See footnote 34 (citing to cases and commentary providing for a constructive trust or an equitable lien where one party advances money for the purchase of property which is titled in a name of another).
In this 19-page decision, the Court went to great lengths to describe why it did not misapprehend the facts and why there was a sound basis in both law and fact for the particular structure of the customized equitable remedy imposed in its original decision.