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By John T. Aquino
Jan. 19 — Errant Gene Therapeutics' claims against Sloan-Kettering's cancer research institute for fraud and breach of a rights transfer agreement for a blood disorder gene therapy treatment will go forward, a federal district court held Jan. 15 in denying the institute's motions to dismiss.
The U.S. District Court for the Southern District of New York did dismiss Errant Gene's claim to documents, clinical trial data and samples and denied standing to two clinical trial participants.
According to the court's written opinion, which was authored by Judge Alison B. Nathan, Sloan-Kettering began gene therapy clinical trials in 2000 for the treatment of thalassemia, a fatal inherited blood disorder. After deciding to stop this research, the institute licensed the rights to its thalassemia treatment to Errant Gene in 2005.
In 2011, the parties contracted to terminate the 2005 agreement and for Errant Gene to sell and transfer to Sloan-Kettering the rights to the clinical grade lentiviral vector, TNS 9.55.3, for 50 percent of all value it received for the treatment.
Errant Gene filed litigation in the Southern District of New York alleging that Sloan-Kettering didn't fulfill its obligations under the agreement. Sloan-Kettering moved to dismiss.
The court agreed with Sloan-Kettering that co-plaintiffs Rocco Girondi, son of Errant Gene founder Patrick Girondi, and Michael Buccellato, both of whom have thalassemia, lacked standing to sue.
Nathan wrote that they weren't parties to the contract and weren't third-party beneficiaries because they hadn't shown that they were the only ones able to sue for breach and because the contract didn't create an enforceable duty to treat everyone who has thalassemia.
The court also dismissed Errant Gene's claim that documents, clinical trial data and samples of the treatment for thalassemia should be returned because, in spite of Errant Gene's argument to the contrary, there was no limit in the agreement that transferred all rights and interest in the vector and the vector information to Sloan-Kettering.
However, the court denied Sloan-Kettering's motion to dismiss Errant Gene's fraud claims.
Nathan wrote that it wasn't clear at this stage of the litigation whether the release from all legal claims in the 2011 agreement was limited to claims against the 2005 agreement; that the fraud and breach claims weren't the same claim being presented as two separate ones; and that Errant Gene had sufficiently argued that it had relied on Sloan-Kettering's alleged misrepresentations, reliance being an essential element of fraud.
As to Errant Gene's breach of contract claim, the court agreed to dismiss the portion that held that the conduct by Sloan-Kettering alleged by Errant Gene violated the clinical trial protocol as described in the amended complaint.
But the court denied dismissal of the portion of the breach claim alleging that Sloan-Kettering breached the agreement by failing to give Errant Gene clinical trial data, even though Errant Gene hadn't requested the data.
In addition, Nathan wrote that it was ambiguous whether or not the 2011 agreement imposed a duty on Sloan-Kettering to commercialize Errant Gene's treatment and that Errant Gene has provided enough extrinsic evidence that Sloan-Kettering delayed completing the contractual paperwork and commencing clinical trials for the court to deny dismissal.
Nathan wrote that pleadings such as Sloan-Kettering's alternative motion for the court to strike portions of the amended complaint won't be granted unless it becomes clear that the allegations in question can have no possible bearing on the subject of the litigation.
Finally, in response to Sloan-Kettering's motion to dismiss Errant Gene's claim for damages as speculative, the court concluded that Errant Gene's pleadings described the alleged causal relationship between breach and damages, thereby allowing the court to draw the reasonable inference that the breach proximately caused some measure of damages.
Accordingly, the court allowed Errant Gene's fraud and breach of contract claims to survive, although the breach claims can't include Errant Gene's allegations that conduct by Sloan-Kettering violated the clinical trial protocol.
Errant Gene, Girondi and Buccellato were represented by David Clifford Burger of New York and Kenneth Sussmane of McCue Sussmane & Zapfel, P.C., New York. Sloan-Kettering was represented by Benjamin Richard Wilson, Charles Alan Weiss and Christopher G. Kelly of Holland & Knight LLP, New York.
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