Novartis Pharm. Corp. v. Adesanya (In re Adesanya), Bankruptcy No. 18-17260-AMC

• Decision Date: 24 March 2020
• Docket Number: Adv. Proc. No. 19-00124-AMC,Bankruptcy No. 18-17260-AMC
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania
• Parties: IN RE ADENEKAN OLA-OLUWA ADESANYA & AFOLUSO ADERONKE ADESANYA, DEBTORS NOVARTIS PHARMACEUTICALS CORP., PLAINTIFF v. ADENEKAN OLA-OLUWA ADESANYA & AFOLUSO ADERONKE ADESANYA, DEFENDANTS

IN RE ADENEKAN OLA-OLUWA ADESANYA & AFOLUSO ADERONKE ADESANYA, DEBTORSNOVARTIS 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 EASTERN DISTRICT OF PENNSYLVANIA

March 24, 2020

Chapter 7

Ashely M. Chan, United States Bankruptcy Judge

OPINION

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"), who was 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 contract in connection with Novartis's annual employee incentive program; Afoluso's breach of the duty of loyalty to Novartis inherent in her employment contract as well as Novartis's Conflict of Interest Policy; sanctions issued against Afoluso for discovery misconduct and pursuing baseless claims against Novartis; and sanctions issued against Adenekan for discovery misconduct.¹

In this adversary proceeding, Novartis seeks to have the Judgment declared nondischargeable pursuant to § 523(a)(2)(A). Accordingly, Novartis has moved for summary judgment on the basis that the District Court findings in support of the Judgment, as well as certain admissions by the Debtors, establish that there is no genuine dispute that the Judgment is nondischargeable pursuant to § 523(a)(2)(A). The Debtors, who are pro se, have responded with their own cross motion for summary judgment.

For reasons more fully described below, the Court will grant Novartis's summary judgment motion in part and deny it in part, and will similarly grant the Debtors' cross motion for summary judgment in part and deny it in part, finding that: (1) there is no genuine dispute that § 523(a)(2)(A), as a matter of law, would not render nondischargeable the portions of the Judgment attributable to fraud on Afoluso's job application and the sanctions award against Adenekan; (2) a genuine dispute of material fact remains regarding Afoluso's state of mind in breaching the Relocation Agreement and Novartis's reliance on her representations made in connection with that agreement; (3) a genuine dispute of material fact remains regarding Afoluso's state of mind in breaching Novartis's annual employee incentive program and the duty of loyalty and Conflict of Interest Policy; and (4) the Court cannot make a nondischargeability determination with respect to sanctions against Afoluso until it determines which portions of the underlying Judgment are nondischargeable, if any.

The Court's conclusion does not impact Novartis's ability to attempt to amend its complaint pursuant to Fed. R. Civ. P. 15 ("Rule 15"), applicable to bankruptcy proceedings through Fed. R. Bankr. P. 7015, to include any other counts that it may consider applicable, such as § 523(a)(2)(B) in connection with the portion of the Judgment attributable to fraud on Afoluso's job application, and § 523(a)(6) in connection with the portion of the Judgment attributable to the sanctions award against Adenekan.

II. FACTUAL BACKGROUND

On September 19, 2013, after being terminated from her employment with Novartis, Afoluso initiated an action in the District Court against Novartis alleging claims for discrimination and retaliation under state and federal law ("District Court Action"). Op. 5-6, Aug. 15, 2016 ("Aug. 2016 Op."); Debtors' Resp. to Nov. St. Uncontested Mat. Facts ¶ 5.

On May 27, 2015, Novartis filed several counterclaims against Afoluso, including fraud on Afoluso's employment application and resume ("Count I"), fraud in connection with the Relocation Agreement entered into between Novartis and Afoluso ("Count II"), breach of the Relocation Agreement ("Count III"), breach of Novartis's Annual Incentive Program ("AIP") ("Count IV"), breach of the duty of good faith and fair dealing ("Count V"), and breach of the duty of loyalty and Novartis's Conflict of Interest Policy ("Conflicts Policy") ("Count VIII") (collectively, "Counterclaims").² Aug. 2016 Op. 6; Compl. Ex. A; Debtors' Resp. to Nov. St. Uncontested Mat. Facts ¶ 6.

After a discovery period which the District Court described as "contentious" and "marked by delay," Novartis filed an omnibus motion for sanctions and summary judgment, seeking, in relevant part, judgment in favor of Novartis on the Counterclaims; dismissal of Afoluso's claimsas a sanction for discovery obstruction, deceit, fraud, and the pursuit of baseless litigation; and sanctions against Adenekan on account of his discovery misconduct. Aug. 2016 Op. 1, 6, 9, 13. Afoluso filed an opposition, which contained an opposition brief from Adenekan, as well as her own cross motion for summary judgment on the Counterclaims. Id. at 1, 9.

In an opinion issued on August 15, 2016 ("First District Court Opinion"), the District Court, in relevant part, granted Novartis's summary judgment motion in connection with Counts I, III,³ IV, V, and VIII; sanctioned Afoluso by dismissing her claims; and sanctioned Adenekan. Id. at 2.

In the First District Court Opinion, the District Court found that on March 3, 2010, Novartis hired Afoluso as a Brand Safety Leader in its Oncology Business Unit when Afoluso signed Novartis's employment offer and that, unbeknownst to Novartis, Afoluso had misrepresented her employment history on her job application, inflating prior salaries, creating "phony" supervisors, and concealing that she had been involuntarily terminated from a prior position. Id. at 2, 20. The District Court further found that Novartis had relied on these representations in deciding to hire Afoluso and in determining her compensation. Id. at 2.

According to the District Court's findings, Afoluso's employment was predicated on her relocating from her home in Pennsylvania to a location closer to Novartis's offices in New Jersey. Id. at 4. To help facilitate her move, Novartis gave Afoluso approximately $26,000 in relocation funds after Afoluso executed a Relocation Agreement with Novartis on March 3, 2010. Id. at 4, 20. However, as the District Court noted, she never relocated and, in fact, workedalmost exclusively from her home in Pennsylvania for the entirety of her tenure at Novartis. Id. at 4, 20.

As further noted by the District Court, Novartis's employee agreement ("Employee Agreement") and Conflicts Policy "precluded Plaintiff from holding outside employment during her tenure with Novartis that would interfere with her obligations to the company." Id. at 3. Also pursuant to the Employee Agreement, Afoluso "agreed to 'devote [her] best efforts and full business loyalty to [her] employment with Novartis' and not to hold 'other employment or engage in any other business which may adversely affect [her] ability to perform [her] job responsibilities at Novartis.'" Id.

Furthermore, the District Court explained that the Conflicts Policy prohibited

employees from: 1) holding a 'second job with or provid[ing] any services to a competitor of' Novartis; 2) owning directly or indirectly 'any interest in any Company which competes, or does business, with' Novartis; and 3) 'engag[ing] in outside employment or other activity which encroaches on time or attention that should be devoted to [Novartis's] affairs, otherwise detracts from your ability to perform your responsibilities' or deprives Novartis of 'your full loyalty.' Id.

Finally, the District Court noted that the AIP made bonuses available to Novartis employees subject to compliance with Novartis's rules and policies. Id.

Notably, the District Court determined that, unbeknownst to Novartis, from the very start of her employment and throughout her tenure with Novartis, Afoluso and her husband jointly owned Global Drug Safety and Surveillance, Inc. a/k/a LaRon Pharma Inc. ("LaRon"), a sub-S corporation engaged in licensing, developing, and marketing prescription drugs of other pharmaceutical companies for four therapeutic groups, including oncology. Id. By virtue of her 50% ownership interest in this specialty pharmaceutical company, the District Court concluded that Afoluso had been in violation of the Employee Agreement, Conflicts Policy, and AIP from the outset of her employment through her termination. Id.

Additionally, according to the District Court, in August 2011, unbeknownst to Novartis, Afoluso obtained a position as a drug safety consultant with Biomedical Consulting International, Inc. ("Biomedical"). Id. at 4. While working for Biomedical, she provided drug safety services to Auxilium Pharmaceuticals ("Auxilium"). Id. Through her work with Auxilium, Afoluso provided drug safety services to direct competitors of Novartis. Id. The District Court noted that between 2011 and 2012, Afoluso received $59,189.00 on account of her work for Biomedical and Auxilium. Id.

Similarly, the District Court found that in January 2012, unbeknownst to Novartis, Afoluso, using the alias Ron Nuga, M.D., began providing drug safety services to Astellas Pharma Global Development, Inc. ("Astellas"). Id. In fact, according to the District Court, between January 2012 and February 2013, Afoluso worked approximately forty hours per week for Astellas and earned approximately $500,000. Id. The District Court noted that while Afoluso was billing hundreds of hours for her other consulting jobs, her performance reviews reflected that her limited time in Novartis's offices was negatively impacting her team. Id. at 4-5. As a result, Novartis's human resources business partner instructed Afoluso that she would have to come into the office more frequently. Id. at 5. When she...