Berger v. SAVIENT PHARMACEUTICALS, INC.
v.
SAVIENT PHARMACEUTICALS, INC., Appellee/Cross-Appellant.
Court of Appeals of Kentucky.
Thomas H. Glover, Lexington, Kentucky, Briefs for Appellant/Cross-Appellee.
Thomas W. Miller, Lexington, Kentucky, Brief for Appellee/Cross-Appellant.
BEFORE: VANMETER AND WINE, JUDGES; SHAKE,[1] SENIOR JUDGE.
NOT TO BE PUBLISHED
OPINION
WINE, JUDGE:
Dr. Joseph R. Berger appeals from a summary judgment by the Fayette Circuit Court dismissing his breach of contract claims against Savient Pharmaceuticals, Inc. Savient has filed a protective cross-appeal on issues which it contends would also entitle it to summary judgment on Dr. Berger's claims. Dr. Berger maintains that he had a partly oral contract with Savient's predecessor to provide consulting services, and that Savient has breached that agreement by failing to renew the consulting agreement. The trial court found that parol evidence is not admissible to prove the existence of the alleged oral agreement and that Dr. Berger's claims for compensation under the oral agreement are untimely. Finding no error, we affirm on the direct appeal and conclude the cross-appeal is moot.
This case involves a contract for testing of an anabolic steroid called Oxandrolone. G.D. Searle & Company developed the drug in 1964. In 1989, Searle sold its rights in Oxandrolone to Gynex Pharmaceuticals, Inc. At the time, Oxandrolone had been discontinued from the market.
In 1990, Dr. Berger, then a physician and professor at the University of Miami (Florida), developed the idea of using Oxandrolone to treat patients suffering from myopathy and weakness related to HIV. In 1991, he contacted Gynex and advised them of his positive results with this therapy.
In late 1991 and early 1992, Gynex sought to engage Dr. Berger as a consultant for Oxandrolone studies in the treatment of HIV patients. After continued discussions and an exchange of draft letter agreements, Gynex faxed a draft consulting agreement to Berger on April 3, 1992. This document had already been signed by Dr. Robert Dudley, Ph.D., Vice President of Research and Development for Gynex. Dr. Berger signed the consulting agreement on April 7, 1992. A representative from the University of Miami also signed the document.
Under the terms of the consulting agreement, Dr. Berger agreed to conduct studies on the use of Oxandrolone to treat patients suffering from HIV-related muscle weakness and myopathy. He also agreed to assign any patent rights he developed related to Gynex. In exchange, Gynex agreed to pay Dr. Berger a consulting fee of $20,000. The agreement specified a twelve-month term which could be renewed annually upon agreement of the parties.
Pursuant to the terms of the agreement, Dr. Berger executed an assignment of his patent rights for the use of Oxandrolone to Gynex on October 9, 1992. On April 3, 1993, the parties agreed to extend the consulting agreement for one additional year on the same terms. Gynex paid Dr. Berger an additional $20,000 for the renewal. Shortly thereafter, Gynex was acquired by Bio-Technology General, Ltd. ("BTG"). On December 15, 1993, Dr. Berger executed another assignment of his rights in a second patent application for the use of Oxandrolone for HIV symptoms.
In a letter dated October 18, 1994, Berger advised BTG that he would not be able to start any studies of Oxandrolone in a time frame suitable to BTG because of his professional move to the University of Kentucky. In the same letter, he proposed signing a licensing agreement with BTG in exchange for monetary payment and future royalties. The agreement was never executed. In March 1995, BTG asked Berger to sign documents related to the use of Oxandrolone for HIV symptoms. Dr. Berger declined to do so.
In November 1995, BTG launched its version of Oxandrolone under the brand name of Oxandrin. Oxandrolone had received an "orphan drug designation" from the Food and Drug Administration ("FDA") for the treatment of HIV. The orphan drug designation for Oxandrolone provided BTG with market protection that would bar a generic competitor coming to market for approximately three to five years.
In late 1995 and 1996, BTG made arrangements for the "Phase III" study to test the impact of Oxandrolone on HIV symptoms in a large sample population. A Phase III study is a prerequisite for a drug to obtain FDA approval for labeling purposes. Dr. Berger states that BTG initially included him in this study. But shortly thereafter, BTG informed Dr. Berger that he would not be involved in the study.
In 1999, BTG contacted Dr. Berger to request his assistance with the completion of certain patent documents. After some initial reluctance, the parties reached an agreement in which BTG paid Dr. Berger certain monetary consideration in exchange for his time and effort in drafting and executing documents related to the patent process.
On July 18, 2000, and December 30, 2003, respectively, the United States Patent Office issued patents relating to the use of Oxandrolone in the treatment of HIV. Both patents list Dr. Berger as the inventor and BTG as the assignee. Also in 2003, BTG changed its name to Savient.
In 2007, Savient contacted Dr. Berger to request his cooperation in litigation asserting the Oxandrolone patents. Dr. Berger declined and, shortly thereafter, filed this action against Savient. He asserted claims alleging that Savient had breached its contractual obligations to him under the consulting agreement, the assignment agreement, and through oral representations in which Gynex had committed to include Dr. Berger in all future studies relating to Oxandrolone.
Following a period of discovery, Dr. Berger and Savient filed cross-motions for summary judgment. The trial court granted Savient's motion in an Opinion and Order dated August 17, 2009. In reaching this conclusion, the trial court found that (1) Kentucky law applies to interpretation of the contract; (2) neither the consulting agreements nor the assignment agreements are ambiguous; consequently, parol evidence is not admissible to modify their explicit terms; (3) there is no evidence of any breach of the terms of the written contracts; and (4) in any event, the oral agreement which Dr. Berger seeks to enforce is barred by the five-year statute of limitations contained in Kentucky Revised Statutes (KRS) 413.120(1).
On appeal, Dr. Berger argues that the 1992 consulting agreement was only a partially integrated agreement and is ambiguous on its face. As a result, he maintains that parol evidence was admissible to prove additional oral terms of the contract. He also argues that his claims for enforcement of the oral contract are timely under a continuing breach theory. In its protective cross-appeal, Savient argues that: (1) Florida law governs Dr. Berger's causes of action; (2) Berger's claims were barred by the statute of frauds; and (3) Dr. Berger's claims were also barred by laches and estoppel.
The standard of review governing an appeal of a summary judgment is well settled. We must determine whether the trial court erred in concluding that there was no genuine issue as to any material fact and that the moving party was entitled to a judgment as a matter of law. Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996). Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Kentucky Rule(s) of Civil Procedure ("CR") 56.03. In Paintsville Hospital Co. v. Rose, 683 S.W.2d 255, 256 (Ky. 1985), the Supreme Court of Kentucky held that for summary judgment to be proper, the movant must show that the adverse party cannot prevail under any circumstances. The Court has also stated that "the proper function of summary judgment is to terminate litigation when, as a matter of law, it appears that it would be impossible for the respondent to produce evidence at the trial warranting a judgment in his favor." Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). Because summary judgment involves no fact-finding, this Court's review is de novo, in the sense that we owe no deference to the conclusions of the trial court. Blevins v. Moran, 12 S.W.3d 698, 700 (Ky. App. 2000).
The primary issue in this case concerns the interpretation of the written contract, which is a question of law for the court to decide. Cinelli v. Ward, 997 S.W.2d 474, 476 (Ky. App. 1998). As noted above, the trial court found that the 1992 and 1993 consulting agreements were not ambiguous. Absent an ambiguity in the contract, the parties' intentions must be discerned from the four corners of the instrument without resort to extrinsic evidence. Hoheimer v. Hoheimer, 30 S.W.3d 176, 178 (Ky. 2000).
Dr. Berger points out that this rule does not apply where there was only a partial integration of the contract and does not preclude consideration of portions of an entire agreement which are consistent with the writing. Johnson v. Johnson, 297 Ky. 268, 178 S.W.2d 983, 985 (1944). See also Texas Gas Transmission Corp. v. Kinslow, 461 S.W.2d 69, 71 (Ky. 1970); and Bullock v. Young, 252 Ky. 640, 67 S.W.2d 941 (1934). Consequently, he maintains that he may introduce parol evidence that he had a collateral oral agreement with Gynex.
Dr. Berger alleges that Gynex orally promised to include him in all future studies of Oxandrolone in HIV-infected patients. In his deposition, Dr. Dudley confirmed this was the understanding between Dr. Berger and Gynex. Dr. Berger argues that this understanding may serve as the basis for a separate oral contract and as proof of additional consideration for Dr. Berger's assignment of his patent rights.
However, the 1992 consulting agreement clearly sets out Dr. Berger's consulting duties and his obligation to assign to Gynex his rights to any inventions, improvements, or proposals which he may make during the term of the consulting agreement. The agreement specifically sets out that, "[i]n exchange for the foregoing, Gynex agrees to provide a consultant fee to you in the amount of $20,000." Finally, the agreement provides that it "will expire 12 months after the date both parties sign this agreement but it may be renewed upon mutual agreement between you and Gynex." The 1993 agreement incorporates the terms of the 1992 agreement and also sets out the consideration for and term of the agreement.
None of these terms is susceptible to different interpretations. Consequently, there is no ambiguity in the written contract which would permit extrinsic evidence of additional oral terms. Furthermore, the alleged oral agreement is inconsistent with the terms of the written contract. As a result, parol evidence is not admissible to show that the parties had a different understanding.
Dr. Berger also argues that the parol evidence rule does not preclude him from introducing evidence showing that Gynex had agreed to give additional consideration which was not set out in the consulting and assignment agreements. KRS 371.030. See also Commonwealth, Dept. of Highways v. Schmehr, 388 S.W.2d 131, 133 (Ky. 1965). The true consideration of any instrument may be shown by parol evidence, even without a charge of fraud or mistake. Deatley v. Phillips, 311 Ky. 698, 225 S.W.2d 296, 298 (1949). Dr. Berger notes that the 1992 and 1993 patent assignment indicates that they were given "[i]n consideration of One Dollar ($1.00), and other good and valuable considerations...". Considering this language, together with Dr. Dudley's deposition testimony, Dr. Berger maintains that he can prove that Gynex had promised to renew his consulting agreement indefinitely in exchange for the assignment of his patent rights.
Even if Dr. Berger can prove that Gynex agreed to provide additional consideration for the assignment of his patent rights to Oxandrolone, his claim is still untimely. Dr. Berger concedes that enforcement of an oral contract is governed by the five-year statute of limitations contained in KRS 413.120(1). However, he maintains that Savient's failure to renew the consulting agreement each year amounts to a continuing breach, giving rise to a new cause of action each year. Dr. Berger admits that his claims arising more than five years prior to the filing of the complaint are time-barred. However, he argues that he may pursue claims arising from 2002 to 2007, when he filed this action. He also argues that he may seek rescission of the assignment of his patent rights based on Savient's breach of its oral commitments.
We disagree. Dr. Berger cites no Kentucky authority applying the continuing breach doctrine to an oral contract.[2] Indeed, given the perpetual term of the alleged oral contract, it would seem that application of the doctrine in this case would run afoul of the Statute of Frauds. KRS 371.010(7). Even if the doctrine is applicable, Dr. Berger's cause of action accrued once BTG unequivocally repudiated the contract. See Upton v. Ginn, 231 S.W.3d 788, 791 (Ky. App. 2007).
If Gynex had promised to indefinitely renew Dr. Berger's consulting agreement, then it clearly breached that obligation in 1996, when it informed him that it would no longer include him in any future Oxandrolone studies. The issue arose again in 1999, when BTG asked Dr. Berger for assistance in completing the patent applications. At that time, Dr. Berger informed BTG that it had broken promises to him in the past and he negotiated additional compensation in exchange for his assistance with the patent applications.
On both occasions, BTG clearly indicated that it was not bound by any oral commitments to indefinitely renew Dr. Berger's consulting agreement. Dr. Berger does not allege that he requested or expected performance of the oral agreement after 1996. Therefore, any cause of action for breach of the alleged oral agreement accrued at that time and is now time-barred. Since the trial court properly granted summary judgment on Dr. Berger's claims, the issues raised in Savient's cross-appeal are now moot.
Accordingly, the summary judgment by the Fayette Circuit Court is affirmed.
ALL CONCUR.
[1] Senior Judge Ann O'Malley Shake sitting as Special Judge by assignment of the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and KRS 21.580.
[2] The Kentucky cases cited by Dr. Berger involve application of the doctrine to written contracts, Flege v. Covington & Cincinnati Elevated Railway & Transfer & Bridge Co., 122 Ky. 348, 91 S.W. 738 (1906) (enforcement of covenant in a deed which required the grantee to erect and maintain a stone wall along the line of the grantee's lot); to enforcement of judgments, Bollengier v. Charlet, 141 S.W.3d 14 (Ky. App. 2004) (involving an action to enforce a child-support judgment payable in specific amounts at specific points in time); and statutory claims, Leonard v. Corrections Cabinet, 828 S.W.2d 668 (Ky. App. 1992) (involving ongoing violations of state and federal statutes prohibiting employment discrimination). Likewise, the foreign cases cited by Dr. Berger involved application of the continuing breach doctrine in substantially different situations. Peterson v. Highland Music, Inc., 140 F.3d 1313 (9th Cir. 1998) (involving enforcement of a written copyright assignment and licensing agreement requiring annual royalty payments); Mount Sinai Hospital of Greater Miami, Inc. v. Cordis Corp, 285 So.2d 645 (Fla. App. 1973) (holding that statute of limitations does not apply to proceeding in equity); and Guilbert v. Gardner, 480 F.3d 140 (2d Cir. 2007) (breach of oral contract to fund an ERISA [Employee Retirement Income Security Act] — governed pension plan). The only comparable situation applying the continuing breach doctrine occurred in Feinsilber v. Unipacific Corp., 925 F.2d 1469, 1191 WL 17451 (9th Cir. 1991), an unpublished federal case applying California law. In that case, the plaintiff alleged that the defendant had orally agreed to contract its services for repairs of certain electronic equipment. The plaintiff further alleged that the defendant had committed to provide a specified number of units per week for as long as the units were available and the plaintiff's work met the defendant's expectations. The defendant did not begin performance of the agreement for five months, failed to provide the specified number of units, and discontinued performance after nine months. The Ninth Circuit held that the alleged oral contract imposed a continuing obligation on the defendant to provide the specified number of units weekly and that each weekly failure amounted to a new breach. Consequently, the Court concluded that any breaches which occurred within the two-year limitations period were timely. We find no indication that Kentucky would follow such a broad application of the continuing breach doctrine.
