Backman v. Smirnov

• Decision Date: 17 November 2010
• Docket Number: Civil Action No. 08–CV–11148–RGS.
• Parties: Irving A. BACKMAN, Plaintiffv.Igor V. SMIRNOV and Global Quantech, Inc., Defendants.
• Court: U.S. District Court — District of Massachusetts

751 F.Supp.2d 304

Irving A. BACKMAN, Plaintiff

v.Igor

v. SMIRNOV and Global Quantech, Inc., Defendants.

Civil Action No. 08–CV–11148–RGS.

United States District Court, D. Massachusetts.

Nov. 17, 2010.

Todd J. Bennett, Ryan A. Ciporkin, Corrigan, Bennett & Belfort, PC, Cambridge, MA, for Global Quantech, Inc. (Defendant).

Michael C. Fee, Pierce & Mandell, PC, Boston, MA, for Igor V. Smirnov (Defendant).Dennis Michael Lindgren, Pierce & Mandell, PC, Boston, MA, for Irving A. Backman (Plaintiff).

MEMORANDUM AND ORDER ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

STEARNS, District Judge.

Plaintiff Irving Backman brought this lawsuit against defendants Igor Smirnov and Global Quantech, Inc. (GQI), alleging breach of contract (Count I), quantum meruit (Count II), violation of the Massachusetts Consumer Protection Act, Mass. Gen. Laws ch. 93A, § 11 (Count III), and fraud and misrepresentation (Count IV). The dispute arose over a falling out between Smirnov and Backman over the marketing of a water “activator” touted as a fount of miraculous medical benefits. Defendants moved for summary judgment on August 26, 2010, after the close of discovery. A hearing was held on the motion on November 1, 2010.

BACKGROUND

The material facts, in the light most favorable to Backman as the nonmoving party, are as follows. In January of 2004, Backman found Smirnov on the Internet and contacted him about his “invention” of a means to “activate” water using Magnetic Resonance Effect Technology (MRET). Pl.'s SOF ¶ 89. Backman had a longstanding interest in magnetic resonance (MR) and a thirty-five year history of developing, funding, researching, marketing, and manufacturing products based on “breakthrough” technologies. Id. ¶ 2. Backman invited a discussion with Smirnov as to how his background might be put to use to advance their “common interest.” Id. ¶ 89. During these preliminary discussions, Smirnov made oral and written representations that MRET activated water conferred significant therapeutic health benefits on patients suffering from grave illnesses.¹ Id. ¶ 90.

In March of 2004, Smirnov and Backman agreed orally that in exchange for compensation “in an amount to be agreed upon and commensurate with the effort expended,” Backman would provide consulting services, marketing expertise, and access to his many contacts in a variety of industries to promote and validate MRET on a worldwide basis. Am. Compl. ¶ 17.

On March 9, 2004, Backman and Smirnov (signing on behalf of GQI) entered into a written “Agreement of Non–Circumvention” (NCA). Under the NCA, Backman agreed to market MRET to potential investors, scientific researchers, and end users. Id. ¶ 20. In exchange, GQI agreed to abstain from entering into any contracts or business arrangements with persons or entities introduced by Backman without paying him a finder's fee. Id. ¶ 21. Later in 2004, the NCA was amended to include another GQI product named the MRET Shield or Electromagnetic Radiation Optimum Neutralizer (EMRON).² Id. ¶ 23. ³

Over the next three years, Backman provided Smirnov and GQI with regular status reports regarding the individuals and institutions whom he had approached in his efforts to market MRET and EMRON. Backman began each email update with the iteration, “To supplement our letter agreement of March 9, 2004,....” Id. ¶ 26. At Backman's request, Smirnov acknowledged each of the “amendments” by countersigning and returning them to Backman. Id. ¶ 27. In connection with his marketing efforts, Backman purchased at least $52,000 of MRET and EMRON products from GQI between 2004 and 2007.⁴ At least one of Backman's contacts, Dr. Abraham Lieberman of the Lieberman Parkinson Clinic, received an invoice in the amount of $500 for the shipment of 15 MRET water activators, Pl.'s SOF ¶ 100, although no finder's fee was ever paid to Backman.⁵

From 2004 through 2006, Backman conducted extensive market research to identify prospective users, scientific researchers, and licensees of Smirnov's inventions. Am. Compl. ¶ 28. While he initiated and maintained the relationships with these contacts, he depended on Smirnov to provide the scientific and technical information that he used to market MRET and EMRON. Id. Backman and Smirnov frequently discussed the need for the positive health benefits of MRET to be independently verified, utilizing data or studies generated by credible universities. Id. ¶ 30.

Although Smirnov never told Backman directly, he did not agree with Backman that peer review or third-party validation of MRET was necessary or even desirable. Despite Smirnov's reservations, on November 30, 2004, the two men executed an agreement (Toronto Agreement) in which they undertook to sponsor a scientific study of the benefits of MRET (Toronto Study) that would be funded two-thirds by Backman and one-third by Smirnov and GQI.⁶

Under the Toronto Agreement, Backman was to provide a final report and data analysis to GQI that both parties had the “right to use at their own consideration.” Id. With respect to Backman's compensation, the Toronto Agreement stipulated that any “fees, royalties[,] or licenses resulting from use of the final report or data analysis” would recognize Backman's contribution by conferring a “reasonable portion of such monetary benefits” as “mutually agreed upon.” Id.

Smirnov eventually turned the results of the Toronto Study into an abstract, which he instructed Backman to use in the marketing campaign. Am. Compl. ¶ 33. Smirnov then authored and purportedly published an article entitled “The Physiological Effect of MRET Activated Water on Patients Suffering from AIDS” in the November 2, 2006 issue of Explore: The Journal of Science and Healing,

Vol. 15, no. 2: 37–40.⁷ In the article, Smirnov quoted the Toronto Study extensively and suggested that the study's data confirmed prior clinical observations of the positive effects of MRET activated water on AIDS/HIV patients, among others. Id. ¶ 35. Smirnov also incorporated results from the Toronto Study in an article he published on Alzheimer's disease, as well as in a book that he authored about the benefits of MRET. Pl.'s SOF ¶¶ 112–113.

During the first two years of the NCA, GQI's revenue remained relatively flat. GQI's gross income totaled $465,000 in 2004 and $485,000 in 2005. After the Toronto Study results were made public, GQI's gross income skyrocketed to almost $1,000,000 in 2006, $1,900,000 in 2007, and $2,900,000 in 2008. Id. ¶¶ 114–116. Smirnov attributes the growth in sales to intensive marketing by BioPro, one of GQI's biggest distributors. Backman, for his part, credits the Toronto Study for the sudden increase in revenues, noting that BioPro made liberal use of the Toronto Study data in its marketing materials. Id. ¶ 118.

Beginning in August or September of 2006, Smirnov began altering Backman's status reports. Among other changes, he excised references to certain corporations and countries previously listed as potential licensees, as well as references to EMRON and to international licensees, claiming that some of these potential customers were already under exclusive distribution agreements. Am. Compl. ¶¶ 42–44. On or about September 21, 2006, Smirnov's wife (Irina) informed Backman that she had assumed the role of Smirnov's business manager and that if his relationship with Smirnov were to continue, the NCA would have to be replaced by a new agreement. Smirnov subsequently drafted, signed, and mailed to Backman an Amended Agreement, but Backman refused to sign it.⁸

On November 6, 2006, Smirnov emailed Backman claiming that he had never recommended that MRET activated water be used for medical purposes. He warned Backman that “[y]our decision to provide MRET Water Activators to medical doctors and other customers is your personal decision and full responsibility.” Pl.'s Opp'n–Ex. 10. The relationship between the two men completely collapsed on March 7, 2007, when Smirnov's attorney sent Backman a letter terminating the NCA.

In addition to equitable relief, Backman seeks damages of $29,490.46 for the MRET units that he purchased for marketing purposes, but was unable to resell, $1,557.98 in shipping costs, $5,350 for the unreimbursed costs of the Toronto Study, $2,350 for the funding of additional studies to validate MRET, and $120,000 for secretarial and staffing expenditures from 2004 through 2008. Backman also seeks compensation for the “thousands of hours [he spent] diligently marketing and promoting MRET activated water and EMRON technologies.” Sec. Suppl. Answer to Interrog. No. 13. His “conservative” valuation of his services is $500 per hour. Id.

DISCUSSION

Summary judgment is appropriate where “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c)(2). “A ‘genuine’ issue is one that could be resolved in favor of either party, and a ‘material fact’ is one that has the potential of affecting the outcome of the case.” Calero–Cerezo v. U.S. Dep't of Justice, 355 F.3d 6, 19 (1st Cir.2004), citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Count I—Breach of Contract

“To state a claim for breach of contract under Massachusetts law, a plaintiff must allege, at a minimum, that there was a valid contract, that the defendant breached its duties under the contractual agreement, and that the breach caused the plaintiff damage.” Guckenberger v. Boston Univ., 957 F.Supp. 306, 316 (D.Mass.1997) (citations omitted). To establish a breach, plaintiff has the burden of proving the failure of the defaulting party to conform to one or more of the contract's material terms. A term is material when it involves “an essential and inducing feature” of the contract. Buchholz v. Green Bros. Co., 272 Mass. 49, 52, 172 N.E. 101 (1930). “[I]f the materiality question in a...