John Hancock Life Ins. Co. v. Abbott Labs., Inc.
| Decision Date | 29 April 2016 |
| Docket Number | CIVIL ACTION NO. 05-11150-DPW |
| Citation | 183 F.Supp.3d 277 |
| Parties | John Hancock Life Insurance Company, John Hancock Variable Life Insurance Company, and Manulife Insurance Company (f/k/a Investors Partner Life Insurance Company), Plaintiffs, v. Abbott Laboratories, Inc., Defendant. |
| Court | U.S. District Court — District of Massachusetts |
John A. Nadas, Stuart M. Glass, Choate Hall & Stewart LLP, Boston, MA, for Plaintiffs.
Eric J. Lorenzini, Gregory D. Phillips, Robert E. Satterthwaite, Elizabeth Laughton, Jeffrey I. Weinberger, Ozge Guzelsu, Munger, Tolles & Olsen LLP, Los Angeles, CA, Peter E. Gelhaar, Donnelly, Conroy & Gelhaar, LLP, Boston, MA, for Defendant.
I. INTRODUCTION ...285
II. FINDINGS OF FACT ...285
III. CONCLUSIONS OF LAW ...301
IV. CONCLUSION ...326
I. INTRODUCTION
In this litigation a disappointed investor group, which has successfully limited its obligation to continue contributions, is pursuing additional remedies after a joint venture to develop pharmaceutical compounds turned unsuccessful. Plaintiffs John Hancock Life Insurance Company, John Hancock Variable Life Insurance Company, and Manulife Insurance Company (collectively "Hancock") and Defendant Abbott Laboratories, Inc. ("Abbott") entered into a Research Funding Agreement (the "Agreement") on March 13, 2001. Under the Agreement, Abbott agreed to develop a Research Program for a portfolio of nine compounds in exchange for a funding contribution by Hancock. Hancock, in return, was to receive royalties on any commercially successful compound as well as milestone payments when a compound advanced to a particular stage in its development.
Shortly after the parties signed the Agreement it became clear that some of the compounds would not be successfully developed. Hancock prevailed in its first lawsuit against Abbott, securing a declaration that it could terminate its funding contributions under the Agreement. John Hancock Life Ins. Co. v. Abbott Labs. , No. 03–12501, 2005 WL 2323166 (D.Mass.) (" Hancock I ") aff'd, 478 F.3d 1 (1st Cir.2006) (" Hancock II "). Hancock initiated this second case as a vehicle to raise further contract and fraud claims and ultimately a rescission claim stemming from the RFA. Following a non-jury trial, I make these Findings of Fact and Conclusions of Law pursuant to Fed. R. Civ. P. 52.
II. FINDINGS OF FACT
Hancock provides various financial services. Abbott develops, among other things, pharmaceutical compounds. Prior to entering into the Agreement, Hancock and Abbott had developed a business relationship based upon a series of joint investments in pharmaceutical and biotech companies.
In late 1999 or early 2000, Abbott and Hancock began discussions about a possible investment by Hancock in a portfolio of pharmaceutical compounds that Abbott had under development. Most of the preliminary discussions regarding the Agreement were between Stephen Blewitt, a Managing Director at Hancock, and Phillip Deemer, the Director of Abbott's Corporate Licensing Department. Hancock sought an investment opportunity that would provide above-average returns with a reasonable level of risk. Abbott was interested in a deal that could limit its risk and share the costs associated with pharmaceutical development. As negotiations progressed, the parties focused their discussions on an investment structure through which Hancock would invest approximately $50 million per year over a four-year period to fund the development of a basket of pharmaceutical compounds ("Program Compounds") in Abbott's research and development portfolio. In exchange for this funding, Abbott would compensate Hancock through a series of milestone and royalty payments that would become due if the compounds were commercialized. Abbott would also invest a contractually-agreed amount of money in the compounds over the four-year period.
In mid-2000, the parties began to identify pharmaceutical compounds to be included in the deal and to develop a royalty payment structure. Hancock requested a diversified basket of compounds reflecting a variety of therapeutic indications, at different stages of development, and with different projected sales. Among the proposed Program Compounds were ABT-518, a Matrix Metalloproteinase Inhibitor (MMPI) for the treatment of cancer ; ABT-594, a selective neuronal nicotinic receptor (NNR) agonist for the treatment of chronic pain; ABT-773, one of a new class of antibiotics known as ketolides; and ABT-980, a selective alpha blocker for the treatment of urinary tract blockages. Hancock required that Abbott formally represent and warrant the status, condition, and plans for the proposed Program Compounds.
During the negotiations, Abbott provided Hancock with a Descriptive Memorandum regarding each of the proposed Program Compounds. The Descriptive Memoranda were prepared by Abbott and included information regarding: 1) the development status and technical merits of each compound; 2) the specific indications for which each compound was being developed; 3) the nature and severity of any known side effects associated with each compound; 4) the estimated size of the commercial markets for each compound; and 5) the identity of any actual or potential competing products from other pharmaceutical companies. Drafts of the Descriptive Memoranda were reviewed by Deemer and Dr. John Leonard, Abbott's Vice President of Development, before they were sent to Hancock.
Abbott also provided Hancock with information regarding Abbott's anticipated development spending on the proposed compounds through projections and drafts of Abbott's first Annual Research Program ("ARP"). The ARP drafts included information regarding Abbott's objectives, activities, and budget for each of the proposed compounds over the life of the Agreement.
To verify the accuracy of Abbott's Descriptive Memoranda, Hancock conducted its own research assessment regarding each of the proposed Program Compounds. Hancock retained Dr. Lynn Klotz, an independent consultant with expertise in biotechnology, to review the Descriptive Memoranda and to verify the accuracy of the information that Abbott supplied in those documents. Klotz reviewed publicly available information related to the compounds and interviewed independent researchers and physicians who he believed could offer useful information about the compounds. He also interviewed Leonard and asked him a series of questions regarding the proposed Program Compounds.
Klotz finished his research in mid-July 2000 and provided Blewitt with summaries of his preliminary findings. Klotz ultimately concluded there was no "indication of deception on Abbott's part" in the Descriptive Memoranda. However, Klotz reviewed only the June 2000 Descriptive Memoranda; Blewitt did not ask Klotz to review the November 2000, February 2001, or final versions of the Descriptive Memoranda. Klotz also did not review Abbott's first ARP.
Hancock and Abbott continued to negotiate in the fall of 2000. In October 2000, Abbott notified Hancock that it had discontinued development of ABT-980, one of the proposed...
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