Paul O. Schwarzenberger, M.D. & Clinical Oncology Research Assocs., L. L.C. v. La. State Univ. Health Scis. Ctr. New Orleans

• Decision Date: 24 August 2017
• Docket Number: NO. 2017-CA-0024.,2017-CA-0024.
• Citation: 226 So.3d 1200
• Parties: Paul O. SCHWARZENBERGER, M.D. and Clinical Oncology Research Associates, L.L.C. v. LOUISIANA STATE UNIVERSITY HEALTH SCIENCES CENTER NEW ORLEANS, and The LSU Board of Supervisors
• Court: Court of Appeal of Louisiana — District of US

226 So.3d 1200

Paul O. SCHWARZENBERGER, M.D. and Clinical Oncology Research Associates, L.L.C.

v.LOUISIANA STATE UNIVERSITY HEALTH SCIENCES CENTER NEW ORLEANS, and The LSU Board of Supervisors

NO. 2017-CA-0024.

Court of Appeal of Louisiana, Fourth Circuit.

AUGUST 24, 2017

Samantha P. Griffin, J. Dalton Courson, STONE PIGMAN WALTHER WITTMANN L.L.C., 546 Carondelet Street, New Orleans, LA 70130–3588, COUNSEL FOR PLAINTIFFS/APPELLANTS, PAUL O. SCHWARZENBERGER, M.D.AND CLINICAL ONCOLOGY RESEARCH ASSOCIATES, L.L.C

Katherine Bettie Muslow, Meredith Anne Cunningham, 433 Bolivar Street, Suite 820, New Orleans, LA 70112, COUNSEL FOR DEFENDANT/APPELLEE, THE BOARD OF SUPERVISORS FOR LOUISIANA STATE UNIVERSITY AND AGRICULTURAL AND MECHANICAL COLLEGE

(Court composed of Judge Terri F. Love, Judge Daniel L. Dysart, Judge Terrel J. Broussard, Pro Tempore)

Judge Terrel J. Broussard, Pro Tempore

The appellants, Paul O. Schwarzenberger, M.D. and Clinical Oncology Research Associates, L.L.C, ("CORA") seek this Court's review and reversal of the trial court's October 18, 2016 judgment granting summary judgment in favor of the appellees, Louisiana State University Health Sciences Center–New Orleans and the LSU Board of Supervisors("LSU") dismissing the appellants' claims with prejudice.For the reasons herein, we affirm.

Facts and Procedural History

On July 15, 2009, the plaintiffs/appellants filed a petition for writ of mandamus, declaratory relief and damages or alternatively petition for injunctive relief against the defendants/appellees in Civil District Court for the Parish of Orleans.

The petition alleges that the appellees are liable for breach of contract and willfully failing to transfer funds to either of the appellants.

According to the petition, the appellant, Dr. Schwarzenberger, specializes in hematology, internal medicine, and clinical oncology.In 1995, the appellant began working for LSU Medical School as an assistant professor, and later became a tenured associate professor of medicine and associate professor of genetics.During his tenure at LSU, the appellant entered into separate agreements with three pharmaceutical companies, Ligand, GlaxoSmithKline and NovaRX, to lead clinical trials of cancer treatments on terminally ill cancer patients who had no other medical options.Each agreement is explained below.

In 2002, the GlaxoSmithKline agreement was entered into with LSU.According to the agreement, GlaxoSmithKline was to submit payments for services directly to LSU to pay for the study.

In 2003, LSU entered into two separate agreements for additional clinical studies with NovaRx and Ligand¹ .NovaRx and Ligand sent money directly to LSU for these studies to be performed.

In 2004, while the above studies were ongoing, the appellant resigned from his full-time position at LSU and became part-time.At that time, LSU, as well as the pharmaceutical sponsors of the studies, made written requests that all of the appellant's patients under the studies be transferred out of the LSU system.Consequently, on May 21, 2004, the appellant formed CORA, an entity for him to continue the clinical trials.Separate transfer agreements were entered into so that residual funds from the clinical trials would be transferred to CORA.The appellant alleges that during that time, and in an effort to keep his patients alive, he also worked under the auspices of Touro Infirmary New Orleans and then Providence Hospital in Mobile, Alabama.The appellant claims that his repeated attempts to get LSU to transfer funds to either him or CORA were to no avail.

On February 16, 2011, LSU answered the petition and filed a reconventional demand against the appellant alleging that he failed to properly manage financial matters associated with the clinical trials constituting a breach of the appellant's employment agreement with LSU.

This appeal focuses on three separate motions for summary judgment filed by LSU.

First, LSU filed a motion for summary judgment on appellant's contract claims.Next, LSU filed a motion for summary judgment on appellant's claims regarding the Ligand trials, arguing a lack of justiciable controversy on the grounds of mootness.Lastly, LSU filed a motion for summary judgment on appellant's claims for breach of contract and breach of fiduciary duty with respect to the GlaxoSmithKline clinical trials.

On August 13, 2015, the trial court held a contradictory hearing.At the hearing, the trial court heard arguments on LSU's motion for summary judgment filed in opposition to the appellant's injunctive and mandamus relief; both LSU's and the appellant's motion in limine to exclude the expert testimony of each party's witnesses; and the three motions for summary judgment filed by LSU on July 28, 2015.

A review of the transcript of the hearing held on October 18, 2016, shows that the testimony of the expert was lacking in methodology and scientific quality and could not assist the court in its deliberations.The trial court also excluded the expert deposition testimony of Holly Sharp that was offered by the appellant to demonstrate a loss of profit.As to LSU's motions for summary judgment, in the October 18, 2016 judgment reduced to writing, the trial court ruled:

IT IS ORDERED, ADJUDGED AND DECREED that LSU's Motion for Summary Judgment on Plaintiffs' Claims Regarding the Ligand 48/49 Trials Due to Lack of Justiciable Controversy on Grounds of Mootness is GRANTED and that LSU's Motion for Summary Judgment on Plaintiffs' Contract Claims is GRANTED.Accordingly, IT IS ORDERED that plaintiffs' claims against LSU be and the same [sic] are hereby DISMISSED WITH Prejudice Pursuant to La. Code Civ. Proc. art. 1920...

This judgment is the subject of the instant appeal.

Daubert Challenge

The appellant argues the trial court erred in holding, as a matter of law, that his expert Holly Sharp, CPA, "could not testify."

According to the appellant, Holly Sharp was retained as an expert CPA to offer her opinion regarding the monies CORA is allegedly due from the clinical trials; to substantiate whether LSU owed CORA money; and to determine whether LSU's auditors properly calculated the additional costs associated with the clinical trials.The overall contention of appellants on this issue is that the exclusion of the testimony of Holly Sharp was contrary to the pronouncements in Daubert v. Merell Dow Pharmaceuticals, Inc. , 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469(1993).(analysis below ).

In addition to the arguments posited above, the appellant argues that the trial court created an arbitrary baseline in determining that Ms. Sharp had not performed the work necessary to qualify as an expert.

LSU maintains that the trial court did not abuse its discretion in excluding Ms. Sharp's testimony asserting that Louisiana courts look to federal case law for guidance as to Daubert .LSU cited Lee Valley Tools, Ltd. v. Indus. Blade Co., 288 F.R.D. 254, 266(W.D.N.Y.2013), wherein the court stated that "an expert witness is permitted to use assistants in formulating his expert opinion,"Dura Auto. Sys. of Ind., Inc. v. CTS C orp. ,285 F.3d 609, 612(7th Cir.2002), although an expert report that is merely a conduit for the opinion of a non-testifying expert must be excluded.Id. at 613."

The general rule governing the admissibility of expert testimony in Louisiana courts is found in La.C.E. art. 702 which states that: "[a] witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if four conditions are satisfied."The first, and critical, inquiry is to determine if "[t]he expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue."La.C.E. art. 702(1);seeState v. Farrier, 14-0623, p. 7(La. App. 4 Cir.3/25/15), 162 So.3d 1233, 1239.The other three conditions pertinent to a Daubert – Foret inquiry conducted by the trial judge as gatekeeper, are whether "...(2) The testimony is based on sufficient facts or data; (3) The testimony is the product of reliable principles and methods; and (4) The expert has reliably applied the principles and methods to the facts of the case."La.C.E. art. 702.In civil proceedings, the Daubert – Foret pretrial hearing is used "to determine whether a witness qualifies as an expert or whether the methodologies employed by such witness are reliable under Articles 702 through 705 of the Louisiana Code of Evidence."La.C.C.P. art. 1425 F(1).The party demanding such a pretrial hearing and determination of the reliability of evidence which the opposing party intends to introduce into evidence at the trial "shall set forth sufficient allegations showing the necessity for these determinations by the court."La.C.C.P. art. 1425 F(1)(emphasis added).Upon a timely filed and sufficiently alleged motion for a Daubert – Foret hearing, the court"shall" hold a contradictory hearing.La.C.C.P. art. 1425 F(2)."At the hearing, the court shall consider the qualifications and methodologies of the proposed witness based upon the provisions of Articles 104(A) and 702 through 705 of the Louisiana Code of Evidence."Id.

Thus, in exercising her gatekeeping function, a trial judge must make a "preliminary assessment of whether the reasoning or methodology underlying the testimony is scientifically valid and of whether that reasoning and methodology properly can be applied to the facts in issue.' "Daubert,509 U.S. at 592–593, 113 S.Ct. 2786."Significantly, if the gatekeeping role is not properly executed, there is a risk that the expert evidence may be prejudicial or misleading.For this reason, trial judges must employ ‘a careful evaluation of the methodology surrounding the testimony and its conclusions."State v. Foret, 93-0246(La.11/20/1993), 628 So.2d 1116, 1122.

In the instant case, accounting and audit principles, means, and methods of the application to the facts...