Novartis Pharm. Corp. v. Adesanya (In re Adesanya)

• Decision Date: 14 July 2021
• Docket Number: Bankruptcy No. 18-17260-AMC,Adv. Proc. No. 19-00124-AMC
• Citation: 630 B.R. 435
• Parties: IN RE Adenekan Ola-Oluwa ADESANYA & Afoluso Aderonke Adesanya, Debtors. Novartis Pharmaceuticals Corp., Plaintiff v. Adenekan Ola-Oluwa Adesanya & Afoluso Aderonke Adesanya, Defendants
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

630 B.R. 435

IN RE Adenekan Ola-Oluwa ADESANYA & Afoluso Aderonke Adesanya, Debtors.

Novartis Pharmaceuticals Corp., Plaintiff

v.Adenekan Ola-Oluwa Adesanya & Afoluso Aderonke Adesanya, Defendants

Bankruptcy No. 18-17260-AMC

Adv. Proc. No. 19-00124-AMC

United States Bankruptcy Court, E.D. Pennsylvania.

Signed July 14, 2021

Pamela L. Cunningham, Stephen M. Hladik, Haldik, Onorato & Federman, LLP, North Wales, PA, John B. McCusker, McCusker, Anselmi, et. al., Florham Park, NJ, for Plaintiff.

Honorable Ashely M. Chan, United States Bankruptcy Judge

I. INTRODUCTION

In June 2017, the plaintiff, Novartis Pharmaceuticals Corp. ("Novartis"), obtained a prepetition judgment ("Judgment") in the United States District Court for the District of New Jersey ("District Court") against the debtors, Afoluso Adesanya ("Afoluso"), a former employee of Novartis, and her husband, Adenekan Adesanya ("Adenekan," collectively with Afoluso, "Debtors"), for fraud in connection with an employment application and resume submitted to Novartis by Afoluso; breach of contract in connection with a relocation agreement between Afoluso and Novartis ("Relocation Agreement"); Afoluso's breach of the duty of loyalty to Novartis inherent in her employment contract as well as Novartis's Conflict of Interest Policy ("Conflicts Policy"); Afoluso's breach of contract in connection with Novartis's annual employee incentive program; sanctions issued against Afoluso for discovery misconduct and pursuing baseless claims against Novartis; and sanctions issued against Adenekan for discovery misconduct.

In this adversary proceeding, Novartis seeks to have the Judgment declared nondischargeable pursuant to § 523(a)(2)(A), § 523(a)(2)(B), and § 523(a)(6). On summary judgment, Novartis established many elements necessary to support its nondischargeability claims against the Debtors. Trial proceeded on the following remaining issues: (1) whether the portion of the Judgment attributable to fraud in connection with Afoluso's employment application and resume is nondischargeable; (2) in connection with Afoluso's breach of the Relocation Agreement, whether she knew her representation that she intended to relocate was false at the time she made it, whether she purposely made that representation intending to deceive Novartis, and whether it was justifiable for Novartis to rely on her representation that she intended to relocate; (3) in connection with Afoluso's breach of her duty of loyalty and the Conflicts Policy, whether Afoluso knew she was creating a misleading impression by failing to disclose external employment she held during her employment at Novartis and whether she purposely failed to disclose her external employment intending to deceive Novartis; (4) in connection with Afoluso's breach of the annual employee incentive program, whether Afoluso knew her failure to disclose certain conflicts of interest created a misleading impression that she was eligible for the employee incentive program when she was not and whether she purposely failed to disclose conflicts of interest in order to deceive Novartis into maintaining her incentive pay; (5) whether the conduct upon which the District Court sanctioned Afoluso satisfies the elements of § 523(a)(6) ; and (6) whether the conduct upon which the District Court sanctioned Adenekan satisfies § 523(a)(6).

For the reasons described below, the Court concludes that Novartis has established by a preponderance of the evidence that all except a small portion of the Judgment is nondischargeable pursuant to § 523(a)(2)(A), § 523(a)(2)(B), and § 523(a)(6).

II. FACTUAL AND PROCEDURAL BACKGROUND

On February 2, 2010, Afoluso applied for a position with Novartis by submitting an application and resume. Ex. 54; Trial Tr. 39:9-13, Jan. 14, 2021 ("Trial Tr."). According to her application and resume, at the time she applied, she was working as the "Senior Medical Director" of Global Drug Safety and Surveillance, Inc., a/k/a LaRon Pharma, Inc. ("Global Drug" or "LaRon"), a sub-S corporation engaged in licensing, developing, and marketing prescription drugs of other pharmaceutical companies for four therapeutic groups, including oncology. Ex. 54; Ex. 4 at 3. Her application and resume also reflected that she had previously worked for Johnson & Johnson as a senior director of "Benefit Risk Management"; Teva North America ("Teva") as a director and "Head of Global Drug Safety and Pharmacovigilance"; and Eli Lilly & Company ("Eli Lilly") as a medical director in pharmacovigilance. Ex. 54. On her application, Afoluso certified that "the information contained in this application is correct to the best of my knowledge and [I] understand that falsification of any information is grounds for immediate dismissal in accordance with Novartis Pharmaceuticals Corporation policy" and that "I also understand that all employment offers are contingent upon the satisfactory results of the company's background check procedures and medical examination..." Id. However, unbeknownst to Novartis, Afoluso had misrepresented her employment history on her job application by inflating prior salaries, creating "phony" supervisors, and concealing that she had been involuntarily terminated from a prior position.¹ Ex. 4² at 2.

By the time Afoluso applied to work for Novartis, she and Adenekan had judgments in mortgage foreclosure entered against two of their properties located at 2510 Peachtree Drive, Perkasie, PA ("Perkasie Property") and 910 West Marshall Street, Norristown, PA ("Norristown Property") for failure to make monthly mortgage payments. Ex. 13-17. In late October 2009, a foreclosure judgment in the amount of $292,076.63 had been entered against the Perkasie Property. Ex. 13, 15. By January 25, 2010, just several weeks prior to Afoluso applying for a position at Novartis, a foreclosure judgment in the amount of $182,162.13³ was entered against the Norristown Property. Ex. 16, 17.

On March 1, 2010, Novartis sent Afoluso a letter offering her the position of Brand Safety Leader in its Oncology Business Unit ("Offer Letter"). Ex. 4 at 2; Ex. 51. The Offer Letter mentioned, in relevant part, that should she accept the offer, Novartis would help her relocate closer to Novartis's offices in New Jersey. Ex. 51. It also mentioned the potential for Afoluso to participate in Novartis's Annual Incentive Program ("AIP") depending on the company's and Afoluso's performances, as well as Afoluso meeting certain eligibility requirements. Id.

On March 3, 2010, Afoluso signed the Offer Letter to accept the position. Id. The same day, she signed a series of forms, including a statement that

I acknowledge that I have received and read copies of the Novartis Pharmaceuticals Corporation Code of Conduct and the Novartis Policy on Corporate Citizenship. I understand the obligations that these policies place upon me, and have had any questions answered to my satisfaction. I understand that compliance with these policies, including the obligation to report any violations, is a condition of my employment with the Company.⁴ Ex. 82.

She also signed an "Employee Agreement" stating, in relevant part,

[i]n consideration of my employment or continued employment at will by Novartis Pharmaceuticals Corporation...and the salary, benefits or other compensation to be paid for my services during my employment with Novartis, I agree as follows: During my employment by Novartis, I will devote my best efforts and full business loyalty to my employment with Novartis. I will comply with its policies and practices, including, without limitation, the Code of Conduct and Corporate Citizenship Policy as these policies may be revised from time to time. I acknowledge that I have received copies of the Novartis Code of Conduct and Corporate Citizenship Policy and that I have read these policies prior to executing this agreement. I will hold no other employment or engage in any other business which may adversely affect my ability to perform my job responsibilities at Novartis. Ex. 52 ¶ 1.

Finally, Afoluso also signed the Relocation Agreement on March 3, 2010. Ex. 8. Afoluso's employment with Novartis was predicated on her relocating from her home in Pennsylvania, located at 389 Highgate Drive, Ambler, PA ("Residence"), where she has resided since 2003, to a location closer to Novartis's offices in New Jersey. Ex. 4 at 4; Trial Tr. 68:18-69:1.

To help facilitate her move, Novartis gave Afoluso approximately $26,000 in relocation funds after Afoluso executed the Relocation Agreement. Ex. 4 at 4, 20. Novartis also had a contract with a relocation vendor, Cartus, to assist employees with relocating. Trial Tr. 43:14-19; Ex. 9 at 1 ("Novartis...has partnered with Cartus, as well as a number of other top rated service providers, to provide you with a program of relocation support to reduce normal move disruptions, and enable you to get settled in your new home and job as quickly as possible."). However, despite acknowledging that the Relocation Agreement required her to relocate within twelve months of her hire, Afoluso, who at the time, had three school-aged children, never relocated from her home and, in fact, worked almost exclusively from her Pennsylvania Residence during the entirety of her tenure at Novartis. Ex. 4 at 4, 20; Trial Tr. 73:12-19, 143:18-20.

Unbeknownst to Novartis, from the very start of her employment and throughout her tenure with Novartis, Afoluso and her husband actually jointly owned Global Drug. Ex. 4 at 3. By virtue of her 50% ownership interest in this specialty pharmaceutical company, Afoluso had been in violation of the Employee Agreement, Novartis's Conflicts Policy, and the AIP from the outset of her employment and through her entire tenure at Novartis. Id.

On July 6, 2010, a few months after starting her employment with Novartis, a mortgage foreclosure judgment in the amount of $109,380.70 was entered against one of the Debtors' properties located at 5073 McKean Avenue, Philadelphia, PA (...