Dec. 23 — SIGA Technologies Inc., which supplies the only smallpox drug in the U.S. strategic stockpile, can't escape a ruling requiring it to pay about $195 million to PharmAthene Inc. in damages stemming from a failed merger and license negotiations between the parties, the Delaware Supreme Court ruled Dec. 23.
The state's high court affirmed the Delaware Chancery Court's decision from January ordering SIGA to pay lump-sum expectation damages for failing to negotiate a licensing agreement in good faith. The chancery court had awarded PharmAthene $113 million and later added $81 million in interest charges, legal fees and costs.
The Delaware Supreme Court's decision came a week after SIGA filed a reorganization plan in the U.S. District Court for the Southern District of New York that describes how it wants to come out of Chapter 11 bankruptcy. SIGA had filed for Chapter 11 to challenge the Delaware chancery court's award without having to post a bond.
The high court found that the court of chancery's determination that expectation damages PharmAthene requested were too speculative didn't prohibit it from awarding them on remand and that the lower court's factual findings had supported its award.
Expectation damages help the injured party in breach of contract litigation realize the value of the expectancy that was created by the promise of the other party.
“When a party breaches a contract, that party often creates a course of events that is different from those that would have transpired absent the breach,” Justice Collins J. Seitz Jr. wrote for the court's majority. “The breaching party cannot avoid responsibility for making the other party whole simply by arguing that expectation damages based on lost profits are speculative because they come from an uncertain world created by the wrongdoer. Rather, when a contract is breached, expectation damages can be established as long as the plaintiff can prove the fact of damages with reasonable certainty. The amount of damages can be an estimate.”
In a dissenting opinion, Justice Karen L. Valihura found that only reliance damage should have been available to PharmAthene.
“I disagree with the Majority's articulation of the standard of proof required for an award of expectation damages, its approval of the trial court's consideration of post-breach evidence, and its application of the “wrongdoer rule” to lessen the quantum of proof to the point of speculation and to broadly attribute to SIGA uncertainties in damages as the ‘but for' cause for failure to consummate a license agreement,” she wrote.
In a statement released after the ruling, Dr. Eric A. Rose, SIGA's chairman and chief executive officer, said that the company was disappointed by the Supreme Court's ruling but that it had anticipated it by filing its reorganization plan. The plan was supported by the Official Committee of Unsecured Creditors appointed in SIGA's Chapter 11 bankruptcy case, of which PharmAthene was one of two members.
SIGA was represented by Stephen P. Lamb, Meghan M. Dougherty and Matthew D. Stachel of Paul, Weiss, Rifkind, Wharton & Garrison LLP, Wilmington, Del., and PharmAthene by A. Richard Winchester and Christopher A. Selzer of McCarter & English, LLP, Wilmington, Del.
To contact the editor responsible for this story: Che Odom at email@example.com
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)