Iliad Research & Trading, L.P. v. Advaxis, Inc.

• Decision Date: 04 May 2015
• Docket Number: Case No. 2:14-CV-00478-BSJ
• Parties: ILIAD RESEARCH AND TRADING, L.P., a Delaware limited partnership, Plaintiff, v. ADVAXIS, INC., a Delaware Corporation, Defendant.
• Court: U.S. District Court — District of Utah

ILIAD RESEARCH AND TRADING, L.P., a Delaware limited partnership, Plaintiff, v. ADVAXIS, INC., a Delaware Corporation, Defendant.

Case No. 2:14-CV-00478-BSJ

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH

May 4, 2015

MEMORANDUM OPINION AND ORDER

District Judge Bruce S. Jenkins

Plaintiff's Motion for Partial Summary Judgment,¹ Defendant's Motion to Deny Motion for Partial Summary Judgment and for Discovery,² and Plaintiff's Motion to Strike³ came before the court for hearing on March 11, 2015. Jeremy C. Reutzel and Brig Harman appeared on behalf of Plaintiff. Frederick R. Kessler and Jack Nelson appeared on behalf of Defendant.⁴

After hearing arguments from counsel, the court granted Plaintiff's Motion to Strike and reserved ruling on the remaining two motions.⁵

Having considered the parties' briefs, the arguments of counsel, and the relevant law, the court GRANTS Plaintiff's Motion for Partial Summary Judgment and DENIES Defendant's competing motion for denial and discovery.

I. DISCUSSION

The following facts are not genuinely disputed:

• Advaxis and Tonaquint entered into the Purchase Agreement on December 13, 2012.⁶

• On November 19, 2012, prior to entering into the Purchase Agreement, Thomas Moore, Advaxis' Chief Executive Officer and Chairman, emailed Tonaquint indicating that Advaxis desired to enter into a 3(a)(10) transaction.⁷

• John Fife—Tonaquint's CEO—responded via email that Tonaquint would like a right of first refusal with respect to any 3(a)(10) transaction.⁸

• As negotiations continued, Advaxis negotiated the right of first refusal into a right to participate as set forth in the Purchase Agreement.⁹

• The Purchase Agreement, at §5.2(k) states as follows:

Section 3(a)(9) and 3(a)(10) Right of Participation. Pursuant to the terms of this subsection, [Advaxis] hereby grants [Tonaquint] a right of participation with respect to any transaction or arrangement structured, in whole or in part, in accordance with Section 3(a)(9) or Section 3(a)(10) of the 1933 Act . . . that [Advaxis] proposes to enter into any time during the period beginning on the date hereof and ending on the later of (i) two (2) years after the date hereof and (ii) the date that all of [Advaxis'] obligations hereunder and the Note are paid and performed in full and the Warrant is exercised in full (or otherwise expired) . . . provided, however, that [Tonaquint] may only elect to participate in acquiring up to 50% of the principal balance of such Section 3(a)(9) or 3(a)(10) Transaction. [Advaxis] shall give written notice of any such proposed section 3(a)(9) or 3(a)(10) Transaction to [Tonaquint] . . . which Section 3(a)(9) or 3(a)(10) Notice shall identify the proposed parties and the terms of the proposed Section 3(a)(9) or 3(a)(10) Transaction.¹⁰

• Still in §5.2, the Purchase Agreement further states "[f]or the avoidance of any doubt, the requirements of this Section 5.2 are material to this Agreement and any violation or breach thereof by the Company shall constitute a default under this Agreement."¹¹

• The Purchase Agreement¹² also contains the following provisions:

o 12. SPECIFIC PERFORMANCE. [Advaxis] and [Tonaquint] acknowledge and agree that irreparable damage would occur in the event that any provision of this Agreement or any of the other Transaction Documents were not performed in accordance with its specific terms or were otherwise breached . . .

o 15.7 Entire Agreement. This Agreement, together with the other Transaction Documents, constitutes and contains the entire agreement and understanding between the parties hereto, and supersedes all prior oral or written agreements and understandings between [Tonaquint], [Advaxis], their Affiliates and Persons acting on their behalf with respect to the matters discussed herein and therein, and, except as specifically set forth herein or therein, neither [Advaxis] nor [Tonaquint] makes any representation, warranty, covenant or undertaking with respect to such matters.

o 15.8 Amendment. Any amendment, supplement or modification of or to any provision of this Agreement, shall be effective only if it is made or given by an instrument in writing (excluding any email message) and signed by [Advaxis] and [Tonaquint].

o 15.9 No Waiver. No forbearance, failure or delay on the part of a party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver of any provision of this Agreement shall be effective (a) only if it is made or given in writing (including an email message) and (b) only in the specific instance and for the specific purpose for which made or given.

o 15.13 No Strict Construction. The language used in this Agreement is the language chosen mutually by the parties hereto and no doctrine of construction shall be applied for or against any party.

• On December 14, 2012, one day after Advaxis and Tonaquint entered into the Purchase Agreement, Ironridge Global IV, Ltd. ("Ironridge") purchased a $611,196.29 debt claim against Advaxis.¹³

• On December 19, 2012, Advaxis and Ironridge entered into a Stipulation for Settlement of Claims that sought to settle Ironridge's claim against Advaxis through a Section 3(a)(10) transaction.¹⁴

• On December 20, 2012, the Superior Court of the State of California for the County of Los Angeles -- Central District entered an order for approval of the Stipulation for Settlement of Claims.¹⁵

• Tonaquint did not participate in the Advaxis-Ironridge Section 3(a)(10) transaction.¹⁶

• Tonaquint later assigned to Iliad all of Tonaquint's right, title, and interest in, to and arising under the Purchase Agreement.¹⁷ Advaxis consented to such assignment.¹⁸

Whether Advaxis breached the Purchase Agreement when it entered into the Section 3(a)(10) transaction with Ironridge requires analysis of three questions: (i) was Tonaquint entitled to participate in the Section 3(a)(10) transaction with Ironridge; (ii) if so, did Advaxis provide sufficient notice of the Section 3(a)(10) transaction with Ironridge; and (iii) did Tonaquint (and Iliad) waive any material breach to the Purchase Agreement?

The court will analyze these three questions in turn.

1. Was Tonaquint Entitled to Participate in the Section 3(a)(10) Transaction with Ironridge?

The Purchase Agreement says what it says. And with regards to the Section 3(a)(10) Participation Right, as outlined above, the Purchase Agreement says the following:

Section 3(a)(9) and 3(a)(10) Right of Participation. Pursuant to the terms of this subsection, [Advaxis] hereby grants [Tonaquint] a right of participation with respect to any transaction or arrangement structured, in whole or in part, in accordance with Section 3(a)(9) or Section 3(a)(10) of the 1933 Act . . . that [Advaxis] proposes to enter into any time during the period beginning on the date hereof and ending on the later of (i) two (2) years after the date hereof and (ii) the date that all of [Advaxis'] obligations hereunder and the Note are paid and performed in full and the Warrant is exercised in full (or otherwise expired) . . . provided, however, that [Tonaquint] may only elect to participate in acquiring up to 50% of the principal balance of such Section 3(a)(9) or 3(a)(10) Transaction.

(CM/ECF No. 22-2), at §5.2(k).

Advaxis seeks to stand in two places at once regarding this contract provision and whether it is ambiguous or unambiguous. In its opposition to the summary judgment motion, Advaxis argues the meaning of the Participation Right provision is unambiguous:

Iliad's interpretation is contrary to the plain language of the purchase agreement's Participation Right. The Participation Right only permitted Tonaquint to participate in Section 3(a)(9) or Section 3(a)(10) transactions "that [Advaxis] proposes to enter into any time during the period beginning on the date hereof . . ." Thus, the Purchase Agreement gives a Participation Right only in transactions that Advaxis "proposed" to enter into after the Purchase Agreement was executed. This interpretation comports with the plain meaning of the word "proposes."

(CM/ECF No. 39), at 5 (internal citations omitted). But at the March 11, 2015 hearing, Advaxis' position was more opaque:

THE COURT: Well, let's return to my earlier question. Is the contract ambiguous?

MR. KESSLER: So our position is it's not ambiguous because it reads clearly in our way. But on this motion we don't have the burden of proof.

THE COURT: Why do we need testimony at all?

MR. KESSLER: Because it's been disputed. Our witnesses have sworn, two witnesses have sworn --

THE COURT: There's a distinction between what occurred, what occurred, and what a contract says.

MR. KESSLER: Yeah. And they've sworn this is what I understand, not what occurred.

THE COURT: No. Their understanding doesn't make a bit of difference, does it? Aren't we looking at the document?

MR. KESSLER: If -- if -- if -- if you think that the question is ambiguous, then their understanding does matter.

THE COURT: Well, no, no. What I think as to what it is or is not ambiguous I don't know is helpful. My question to you was is this ambiguous, and you said no, Judge, this is not ambiguous.

MR. KESSLER: I said our position is it's not ambiguous because it reads our way. That was my response, Judge. It wasn't that it was unambiguous and reads their way, no.

THE COURT: I'll ask you is it ambiguous or isn't it?

MR. KESSLER: All right. If you want me to pick, I'm going to say it's ambiguous and we'll have a trial.

THE COURT: I just want your position.

MR. KESSLER: It's ambiguous.

THE COURT: And if ambiguous, what's the process for clearing up the ambiguity?

MR. KESSLER: The process is discovery and trial.

THE COURT: Oh, but what are you discovering?

MR. KESSLER: We're going to get to talk to the drafters of the document to understand their intent, both the intent and understanding of

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