Medpace, Inc. v. Biothera, Inc.

• Decision Date: 31 March 2015
• Docket Number: Case No. 1:12-cv-179
• Parties: MEDPACE, INC., Plaintiff, v. BIOTHERA, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

MEDPACE, INC., Plaintiff, v. BIOTHERA, INC., et al., Defendants.

Case No. 1:12-cv-179

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO, WESTERN DIVISION

March 31, 2015

Judge Timothy S. Black

ORDER: (1) DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (Doc. 158); and (2) GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT (Doc. 160)

This civil action is before the Court on: (1) Defendants' motion for summary judgment (Doc. 158) and the parties' responsive memoranda (Docs. 173, 177, 182); and (2) Plaintiff's motion for partial summary judgment (Doc. 160) and the parties' responsive memoranda (Docs. 172, 176).¹

I. BACKGROUND FACTS

Medpace requests summary judgment on the following claims and counterclaims: (1) partial summary judgment on Medpace's breach of contract claim against Biothera in the amount of $1,090,802.00; (2) Medpace's fraud claim against Defendants; (3) Biothera's counterclaim for rescission; and (4) Biothera's counterclaim for punitive damages.

Biothera requests summary judgment on Medpace's fraud claim.

II. DEFENDANTS' UNDISPUTED FACTS²

1. Medpace is a sophisticated contract research organization (CRO) that contracts with appropriate clients of its own free will and in good faith. (Doc. 158, Ex. A at 69; Ex. B at 9 (Request for Admission No. 2)).

2. Biothera was founded by Daniel K. Conners in 1997, and Conners is its current Chairman of the Board and President of the Pharmaceutical Group. (Doc. 25 at ¶¶ 1-3).

3. Medpace and Biothera entered into the Master Services Agreement (MSA) on or about April 29, 2009. (Doc. 158, Ex. C, Dep. Ex. 48 at MED_000966; see Doc. 88 at ¶ 6). Pursuant to the MSA, Biothera hired Medpace to provide clinical trial services. (Doc. 46-2 at ¶ 1).

4. Following the execution of the MSA, Biothera and Medpace entered into a series of Task Orders and Task Order Amendments and a Consulting Agreement. (Doc. 46-2 at ¶ 2).

5. In contracting with Biothera, Medpace was able to involve its legal department if it wanted to do so. (Doc. 158, Ex. A at 68; Ex. D at 63).

6. Medpace was under no pressure to sign the master services agreement with Biothera. (Doc. 158, Ex. A at 68).

7. Medpace negotiated the master services agreement with Biothera at arm's length. (Doc. 158, Ex. A at 69).

8. Medpace was not aware of any inappropriate relationship or undue pressure exerted that compelled Medpace to execute the master services agreement with Biothera. (Doc. 158, Ex. A at 70).

9. Medpace has entered into thousands of contracts with sponsors throughout its years of existence. (Doc. 158, Ex. A at 70).

10. Biothera chose Medpace as its CRO, in part, because Medpace understood Biothera's liquidity constraints and agreed to extend its customary payment terms to 120 days. (Doc. 158, Ex. I at 70-71).

11. One-hundred-twenty day payment terms are "outside the norm" of 30 days that Medpace has for payment terms. (Doc. 158, Ex. J at 48). Only one of Medpace's clients has those payment terms: Biothera. (Id., Ex. J at 122; Ex. K at 90).

12. Medpace specifically extended its normal payment terms from 30 to 120 days to accommodate Biothera because Medpace knew that Biothera "didn't have a lot of cash on the balance sheet." (Doc. 158, Ex. L at 53-54).

13. Medpace's CEO, August Troendle, was comfortable extending 120-day payment terms to Biothera because Medpace viewed Biothera's drug as safe and a promising product with which to work. (Doc. 158, Ex. L at 54-56; see Ex. K at 283, 286-287).

14. Biothera awarded Medpace its clinical trials in part because Biothera liked the fact that Medpace was "willing to work with them on payment schedules." (Doc. 158, Ex. M at MED_062591, page 2; see Ex. J, at 71, 119; Ex. N at MED_129055).

15. Medpace and Biothera worked together on a total of four clinical trials from early 2009 until February 29, 2012. (Doc. 67 at ¶¶ 8, 19). Collectively, these are known as the "Imprime Trials."

16. Medpace and Biothera were working together as a collaborative partnership over the course of the parties' relationship. (Doc. 158, Ex. K at 133, 190-191, 266; Ex. O at 219-220).

17. Medpace and Biothera shared a common goal of getting the Imprime Trials enrolled. (Doc. 158, Ex. K at 295). Medpace was happy to work with Biothera in a collaborative fashion to try and get Biothera's Trials enrolled as best as possible. (Id., Ex. O at 327).

18. Raising funds through angel investors frees Biothera from needing to raise funds at the retail level, but also leads to fluctuating funding levels and periodic liquidity constraints. (Doc. 158, Ex. P at 139; Ex. I at 65-66, 70-71).

19. Between January 2009 and February 2012, at least six people at Medpace were aware that Biothera had angel investors and that the amount of Biothera's funding through these angel investors varied: John Wynne (Medpace's Executive Director of Business Development Support), Adam Curley (a Medpace account manager), Jesse Geiger (Medpace's ChiefFinancial Officer), Lyon Gleich (Medpace's Vice President of Medical Affairs who served as Biothera's Acting Chief Medical Officer), Terri Gaffney (a Medpace clinical trial manager), and Jennifer Cutter (a Medpace clinical trial manager). (Doc. 158, Ex. Q at 2).

20. Adam Curley, Medpace's account manager for the Imprime Trials, understood that Biothera had angel investors that were funding the trials. (Doc. 158, Ex. R at 202-203).

21. John Wynne, Medpace's Executive Director of Business Development Support, understood that Biothera had many investors, ranging from small to large. (Doc. 158, Ex. J at 28-29; Ex. S at 197, 221-222).

22. Over the course of its relationship with Medpace, Biothera made numerous payments to Medpace. (Doc. 158, Ex. R at 170; Ex. D at 154-155).

23. According to Jennifer Cutter, the lead clinical trial manager for Medpace on the two lung cancer trials, despite Biothera's varied sources of funding, Biothera "always seemed to come up with" funding. (Doc. 158, Ex. K at 90-91, 125). Biothera worked "in good faith" to "always come up with the money" for Medpace. (Id. at 281-282). Dr. Cutter honestly felt that Biothera wanted to pay Medpace. (Id. at 284).³

24. Medpace's relationship with Biothera had been good from its inception through November 17, 2011. (Doc. 158, Ex. D at 64).

25. To date, Biothera's payments to Medpace have exceeded $7.5 million. (Doc. 158, Ex. T, Schedule 1).

26. By February 2011, Medpace was aware that Biothera had been invoiced for $1.5 million for three studies for which final task orders had not been executed. (Doc. 158, Ex. Z at MED_065375; Ex. J at 148). It was atypical for Medpace to have that high of an outstanding account balance without finalized task orders. (Id., Ex. AA at 317).

27. By the end of July 2011, Medpace had concluded that Biothera was in breach of its contract with Medpace for failure to timely pay invoices. (Doc. 158, Ex. D at 85).

28. Medpace was aware that Biothera had a "history of late payment." (Doc. 158, Ex. J at 172; see Ex. BB, Dep. Ex. 258).⁴

29. In May 2011, CCMP Capital Advisors, LLC ("CCMP"), a private equity fund, purchased a majority stake in Medpace, adding its financial expertise to Medpace's industry experience. (Doc. 158, Ex. CC, BIO-00010337).

30. From July through November of 2011, representatives from both Biothera and Medpace participated in a series of telephone calls to discuss concerns. (Doc. 158, Ex. AA at 323, 325).

31. In calls between John Wynne, Medpace's Executive Director of Business Development Support, and Bill Gacki, Biothera's Chief Financial Officer, Mr. Wynne believes that Biothera stated that it had outstanding balances, that it had investors, that a large investment was imminent, that Biothera was going to make payments to Medpace as soon as Biothera received those investments, and that Medpace would receive the "lion's share" of those investments as it was on the "top of the list." (Doc. 158, Ex. AA at 326-327, 332-10). Mr. Wynne understood that Biothera was paying each vendor as much as it could to keep each vendor working during this time period. (Id. at 332).⁵

32. By September 2011, Medpace began imposing interest charges as a step in "escalating" payment issues to Biothera's attention. (Doc. 158, Ex. EE; Ex. AA at 355).

33. In October 2011, representatives from Medpace and Biothera met in Cincinnati to discuss the Imprime Trials. During this meeting, Medpace voiced concerns around the lack of payment. (Doc. 158, Ex. AA at 359; Ex. FF, Dep. Ex. 365).

34. By November 10, 2011, Medpace had had several conversations with Biothera regarding the "need to get paid." (Doc. 158, Ex. S at 262, 264; Ex. GG, Dep. Ex. 256).

35. On November 17, 2011, a scheduled phone call between Biothera and Medpace took place. Dan Conners from Biothera and Jesse Geiger, John Wynne, and Adam Curley from Medpace participated. (Doc. 158, Ex. R at 153-154; Ex. D at 69).

36. During the November 17, 2011 phone call, Adam Curley, the Medpace account manager for the Imprime Trials, recalls Dan Conners of Biothera stating that Biothera would pay Medpace $1.2 million by the end of 2011 and then make payments of $1 million per month starting at the beginning of 2012 to catch up on amounts allegedly due. (Doc. 158, Ex. R at 172, 175, 207-208, 212-11, 212 -213).

37. Mr. Curley's contemporaneous records of the November 17, 2011 phone call speaks for itself. (Doc. 158, Ex. HH, Dep. Ex. 259; Ex. R at 248-249). This differed from what other Medpace participants recalled.

38. Mr. Curley could not think of a reason why the November 29, 2011 email mis-described the terms of the November 17, 2011 phone call. (Doc. 158, Ex. R at 239).

39. Mr. Curley does not recall any communications from any recipient of his November 29 email informing him that his recitation of the terms of the payment plan with Biothera was incorrect. (Doc. 158, Ex. R at 239-240).

40. Mr. Curley also recalls Biothera representing that it was "imminently close on a partnership to be able to get funding to be able to pay for" its clinical trials. (Doc. 158, Ex.

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