                             UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT


                             No. 06-1587



MARTEK BIOSCIENCES CORPORATION,

                                              Plaintiff - Appellee,

           versus


ROBERT     ZUCCARO,     as    Stockholders’
Representative of the former Interest Holders
of OmegaTech, Inc.,

                                             Defendant - Appellant.


Appeal from the United States District Court for the District of
Maryland, at Baltimore. Andre M. Davis, District Judge. (1:04-cv-
03349-AMD)


Argued:   May 24, 2007                      Decided:   July 17, 2007


Before NIEMEYER and DUNCAN, Circuit Judges, and HAMILTON, Senior
Circuit Judge.


Vacated and remanded by unpublished opinion. Judge Niemeyer wrote
the opinion, in which Judge Duncan and Senior Judge Hamilton
joined.


ARGUED: J. Clifford Gunter, III, BRACEWELL & GIULIANI, L.L.P.,
Houston, Texas, for Appellant. Mark D. Gately, HOGAN & HARTSON,
L.L.P., Baltimore, Maryland, for Appellee. ON BRIEF: Andrew M.
Edison, BRACEWELL & GIULIANI, L.L.P., Houston, Texas; Shelby J.
Kelley, BRACEWELL & GIULIANI, L.L.P., Washington, D.C., for
Appellant. Lauren S. Colton, HOGAN & HARTSON, L.L.P., Baltimore,
Maryland; Catherine E. Stetson, HOGAN & HARTSON, L.L.P.,
Washington, D.C., for Appellee.
Unpublished opinions are not binding precedent in this circuit.




                               -2-
NIEMEYER, Circuit Judge:

      Under the terms of a March 2002 merger agreement between

Martek   Biosciences   Corporation      and   OmegaTech,    Inc.   --   two

manufacturers of “DHA,” a type of long-chain fatty acid thought to

be good for cardiovascular health -- Martek agreed to pay OmegaTech

shareholders an additional $10 million in Martek stock if and when

each of four “milestones” was achieved after the date of the merger

agreement.    One such milestone, which is at issue in this case,

would be achieved if the National Academy of Sciences published an

authoritative statement recommending a “dietary reference intake”

of DHA that would permit an application to the United States Food

and Drug Administration (“FDA”) for a “nutrient content claim on

food labels,” so that upon approval of the application, Martek’s

customers could advertise the presence of DHA in their products.

      The National Academy of Sciences in fact published a report,

which came after the date of the merger agreement, but it stopped

short of setting a precise dietary target for DHA.         The report did,

however, endorse DHA as contributing to the proper intake of a

short-chain   fatty    acid,   “LNA,”    leading    OmegaTech’s     former

shareholders to request payment under the milestone.           When Martek

and the OmegaTech shareholders could not agree whether the National

Academy of Sciences’ report sufficiently recommended DHA to satisfy

the   milestone   requirements,   they   decided   to   seek   regulatory

approval for the product claims based on the report, on the theory


                                  -3-
that    FDA   approval         would      signal     that    the   milestone       had   been

achieved.         Even though the FDA approved the product claims, the

parties still could not agree whether Martek owed the OmegaTech

stockholders the $10 million for satisfaction of the milestone.

Martek commenced this action for a declaratory judgment that the

milestone         had    not   been       achieved,     and    the   former     OmegaTech

shareholders            through    their     appointed        representative,        Robert

Zuccaro, counterclaimed for breach of contract.

       On Martek’s motion for summary judgment, the district court

ruled    that      the     milestone       had   not   been    achieved,       entering     a

declaratory judgment that Martek had no duty to pay the additional

$10 million.             We conclude, however, that the language of the

contractual milestone is ambiguous and that the district court must

therefore assess, as a factual matter, the intentions and purposes

of the parties to the bargain and whether Martek received the

benefit      of    the    bargain.         Accordingly,       we   vacate   the     summary

judgment and remand for further proceedings.



                                                 I

       Prior to the merger, both Martek and OmegaTech manufactured

DHA (docosahexaenoic acid) from algae that naturally produce that

type    of    long-chain          fatty    acid.       DHA    is   used   as   a    dietary

supplement, in baby formula, and as a food additive.




                                              -4-
     Under the merger agreement between Martek and OmegaTech, dated

March 25, 2002, Martek agreed to pay OmegaTech’s stockholders

approximately $50 million in Martek stock.           It also agreed to pay

an additional $10 million in stock for each of four “milestones”

that was achieved during an “earn-out period” -- the period between

March 25, 2002, and October 30, 2004.               Two of the milestones

related to financial performance, recognizing that OmegaTech would

be worth more if the combined companies sold an increased amount of

product   in   the   two   years   after    the   merger.   The   other   two

milestones related to regulatory approval of claims that could be

made about DHA on food packages.            The milestone at issue in this

case is the “nutrient content claim milestone,” which rewarded

potential FDA regulatory action permitting certain types of claims

about DHA on product packages.

     The parties recognize that OmegaTech would have greater value

if customers of the combined companies could make certain types of

“nutrient content claims” on their product packages, such as “this

product contains DHA” or “this product contains 32 milligrams of

DHA, 20% of a daily value.”        The ability to make such claims was an

important business goal because “it would be extremely difficult,

if not impossible, to sign major food companies to DHA licensing

deals unless DHA could be promoted on food labels.”




                                      -5-
     The language of the milestone, keyed to compliance with and

the language of the Food and Drug Administration Modernization Act,

reads as follows:

     If the National Academy of Sciences (the “NAS”), at any
     time during the Earn-Out Period, makes an authoritative
     statement recommending a Dietary Reference Intake (a
     “Recommendation”), including, without limitation, a
     Recommended Daily Intake or any Adequate Intake, citing
     a specific milligram level for the long-chain fatty
     acid[] [DHA] that permits application to the U.S. Food
     and Drug Administration, pursuant to the Food and Drug
     Administration Modernization Act, for a nutrient content
     claim on food labels for [DHA], provided, however, that
     this nutrient content claim must be limited to [DHA] and
     shall specifically not include the short chain omega-3
     fatty acid alpha-linolenic acid (“LNA”), such numbers of
     shares of Martek Common Stock equal to $10 million . . .
     shall be distributed to the Interest Holders.

Cf. 21 U.S.C. § 343(r) (with respect to the emphasized terms).

     The parties initially crafted the language of the milestone to

depend on the FDA’s approval of a nutrient content claim for DHA.

They abandoned that concept, however, because FDA approval would

take too long and the merging parties did not believe that Martek

would be able to obtain FDA authorization based on the then-

existing science. Therefore, they linked the $10 million milestone

payment to the publication of a scientific statement sufficient to

permit regulatory approval of nutrition claims for DHA -- in the

language of the statute, an “authoritative statement” sufficient

for FDA approval.    The agreement thus set achievement of the

milestone at a time earlier in the regulatory process than actual

FDA approval of a nutrient content claim.


                               -6-
     Also important to the merging parties was the right to make a

freestanding nutrient content claim with respect to DHA, a long-

chain fatty acid, as distinct from LNA (alpha-linolenic acid), a

short-chain fatty acid.        If the nutrient content claim for DHA had

to be tied to a claim for LNA, it would be of less commercial value

to the parties. LNA was substantially cheaper than DHA, and Martek

lacked a competitive edge in making LNA.

     Thus, at a high level of generality, the milestone would be

achieved    when    a    scientific   statement   was     published    that   was

sufficient to support an application to the FDA for approval of a

nutrient content claim for DHA, independent of LNA.

     On September 5, 2002, a division of the National Academy of

Sciences issued a pre-publication draft of a report entitled

“Dietary Reference Intakes” (hereafter “Report”), which set dietary

reference intakes for certain food components, including fatty

acids.     The Report, which the OmegaTech stockholders contended

qualified   as     the   “authoritative      statement”    of   the   milestone,

stated:

     Because of a lack of evidence for determining the
     requirement for n-3 fatty acids, an [Adequate Intake] is
     set based on the highest median intake of [short-chain
     LNA] by adults in the United States where a deficiency is
     basically nonexistent in free-living populations . . . .
     Small amounts of [long-chain DHA] can contribute towards
     reversing an n-3 fatty acid efficiency . . . . [DHA] can
     contribute up to 10 percent of the total n-3 fatty acid
     intake and therefore up to this percent can contribute
     towards the [Adequate Intake] for [LNA].



                                       -7-
Martek, however, did not agree that the Report was adequate.                    To

resolve   the   question    whether        this       statement   satisfied    the

milestone, the OmegaTech stockholders (through Zuccaro) offered to

file a notification with the FDA for nutrient content claims for

DHA, on the theory that FDA approval of the nutrient content claims

would be strong evidence that the milestone was met. Martek agreed

with this course of action. The OmegaTech stockholders, as part of

a group of DHA manufacturers, applied for approval from the FDA in

January 2004 by submitting to the FDA a “notification” of the

specific nutrient content claims for DHA they wanted, basing these

claims on the Report.      Under the FDA’s process, the FDA could have

approved the submitted claims, as contained in the notification, or

it could have allowed 120 days to elapse without disapproving the

claims, see 21 U.S.C. § 343(r)(2)(H), in which case the claims

would be approved by operation of law.

     FDA let the 120 days elapse, and on May 15, 2004, the DHA

manufacturers   were     free    to    make   the     nutrient    content    claims

contained in the notification.           Consistent with this approval, the

FDA placed a notice of the claims on a public docket.

     Unsatisfied    by     the        nutrient    content     claims    of    this

notification,   Martek     itself       filed     a    nutrient   content     claim

notification in January 2005 for different claims, again based on

the Report.     According to a Martek nutritionist who worked on

drafting the notification, an approval of these nutrient content


                                        -8-
claims   “would     probably    satisfy     the    milestone”     in    the    merger

agreement. The Martek notification represented that the Report was

an authoritative statement and that the nutrient content claims for

DHA met the FDA requirements, as a recommended level of DHA could

be derived from the Report.

      Again the FDA approved the Martek notification by allowing the

120   days   to    pass   without     comment,    and   by   operation        of   law,

manufacturers were then permitted to make the nutrient content

claims for DHA (without referring to LNA), as claimed in the Martek

notification.      Again, the FDA placed a notice on the public docket

for the allowed claims.

      To date, the FDA has left in place the nutrient content claims

contained     in     both     OmegaTech’s        notification     and     Martek’s

notification and has approved, in addition, a Martek petition,

based in part on the Report, to make health claims for DHA (more

potent claims than simple nutrient content claims).

      When the parties failed to agree thereafter on whether the

milestone in the merger agreement had been met, Martek commenced

this action for a declaratory judgment and moved for summary

judgment declaring that the milestone had not been met.                             In

granting     Martek’s     motion,     the   district    court   held     that      the

milestone had not been achieved because (1) “[T]he merger agreement

specifically       requires    that    [a   National    Academy    of    Sciences]

endorsement of [DHA] come unattached to a recommendation on LNA


                                        -9-
. . . [T]his is not the case”; and (2) the Report did not cite a

“specific milligram level” for DHA.1                From the district court’s

judgment, the OmegaTech stockholders, through Zuccaro, filed this

appeal.



                                           II

      Delaware law, which applies in this diversity action by reason

of the merger agreement’s choice of law provision, requires that

the text of a contract be applied if its meaning is clear.                   But if

the   text        is   ambiguous,   the    court    “will   consider   testimony

pertaining        to   antecedent   agreements,     communications     and   other

factors which bear on the proper interpretation of the contract.”

Pellaton v. Bank of New York, 592 A.2d 473, 478 (Del. 1991).

      The district court found the text of the milestone provision

clear       and   applied   the   clear   meaning    to   grant   Martek   summary

judgment.         It based its conclusion on two reasons.         First, it held

that “the merger agreement specifically requires that [a National

Academy of Sciences] endorsement of [DHA] come unattached to a

recommendation on LNA” and that the Report’s endorsement of DHA did

not come unattached to a recommendation on LNA.                      The court’s

reasoning,         however,   misreads     the   milestone    provision.       The


        1
       The district court did not reach Martek’s two other arguments
 why the milestone was not achieved -- that the Report did not
 contain “authoritative statements” and that the Report did not
 “permit application” for a nutrient content claim for DHA.
 Nonetheless, we find these arguments to be without merit.

                                          -10-
provision does not require that the National Academy of Sciences’

recommendation on DHA come unattached to a recommendation on LNA.

Rather, it requires that the nutrient content claim for DHA not

include LNA.    The parties bargained for the sort of recommendation

that would reasonably support a nutrient content claim for DHA,

which is why the decoupling of DHA and LNA was only required in the

nutrient content claim, not the recommendation supporting that

claim.     With the text as written, the district court would have

been     required   to   determine    whether   the   recommendation   was

sufficient to support a freestanding nutrient content claim for

DHA.

       Second, the district court held that the “[Report] does not

‘cite a specific milligram level’ that it recommended for [DHA]

that could be applied to a nutrient content claim.”           Because the

Report gave a range of intakes for DHA consistent with good health,

there was no “specific milligram level.”        “Whereas the parties, by

the nutritional milestone, sought a declaration of the level of DHA

that a person should take, what they got from the [Report] was an

upper limit of how much someone could take.           In this (material)

sense, the nutritional milestone is not met.”             In making this

holding, the court construed an ambiguous term, resolving the

ambiguity to reach one chosen result.       The same language, however,

equally supports the conclusion that the Report did cite specific

milligram levels for DHA.


                                     -11-
     The Report cited a specific milligram level for the short-

chain       fatty   acid   LNA,   giving   a   level,   for   example,   of   1600

milligrams per day for adult men.              It then proceeded to state that

up to 10% of that milligram level for LNA could be achieved by

consuming DHA.         Thus, the Report could be read to say that 160

milligrams of DHA could, for adult men, help achieve the health

benefits suggested by the Report.              While some levels could to this

extent be derived from the Report for DHA, the question remained

whether they were the type of levels bargained for by the parties.

     The parties focus on the semantics of whether the “range”

cited by the Report can include a “specific milligram level.”                  The

OmegaTech stockholders rely on a dictionary definition of “range,”

noting that the term means a “series extending between certain

limits.”       They argue accordingly that the Report’s citing of a

range is tantamount to citing a series of acceptable levels.

Martek responds by arguing that because the Report’s range was

consistent with zero consumption of DHA, the Report contains no

“precise numeric value.”2           Both of these arguments are based on

abstract understandings of the meaning of the word “level” and

whether citing a range is equivalent to citing a level.                       In a

particular setting, however, each might be correct in light of a


        2
       Martek does not on appeal defend the district court’s
 distinction between a statement of how much DHA a person “should”
 take and a statement of how much DHA a person “could” take.
 Neither the parties’ agreement nor the industry practices seem to
 assign relevance to this distinction.

                                       -12-
particular purpose.    Nothing on the face of the contract indicates

which of these specific meanings the drafters had in mind. Indeed,

the drafters appear to have focused on any level “that permits

application . . . for a nutrient content claim on food labels.”

The proper definition of the term therefore depends not only on an

abstract linguistic analysis, but also on the commercial purpose of

the milestone provision.    And determining that purpose requires an

examination of extrinsic evidence of the parties’ intent.

     The milestone provision also includes a structural ambiguity.

It provides that the OmegaTech stockholders would receive an

additional $10 million if (1) the National Academy of Sciences

issued an “authoritative statement,” (2) recommending a “dietary

reference intake,” (3) citing a “specific milligram level,” (4)

that “permits application” to the FDA for a “nutrient content

claim” for DHA.       Structurally, the provision identifies three

criteria for the Report (items 1, 2, and 3), and one goal of the

milestone (item 4).    As a whole, the provision appears to be aimed

at rewarding OmegaTech’s stockholders when the forward-looking

criteria reasonably suggest that a nutrient content claim for DHA

could be expected to be approved by the FDA.    But in this case, we

need not look forward to see whether a nutrient content claim could

reasonably be expected to be approved, because we can look backward

and see that a nutrient content claim was indeed approved by the

FDA, no less than three times.   Because the milestone is phrased as


                                 -13-
if it will be evaluated after the issuance of the Report but before

any FDA action, it does not provide guidance as to how, or even

whether, the criteria were to be evaluated once the FDA had

approved a nutrient content claim. The milestone provision is thus

ambiguous, because not all reasonable readers of the contract would

conclude   that     the     criteria     are   freestanding   contractual

requirements rather than proxies for an ultimate goal, which we now

know has been accomplished.3

     Because      the     milestone    provision    is   ambiguous,   the

responsibility for the courts is to find the intent of the parties,

relying on whatever evidence sheds light on that intent. See

Comrie v. Enterasys Networks, Inc., 837 A.2d 1, 13 (Del. Ch. 2003)

(holding that when a contract’s terms are ambiguous, “the court may

consider extrinsic evidence to uphold, to the extent possible, the

reasonable shared expectations of the parties at the time of

contracting”); accord Seaford Golf & Country Club v. E.I. duPont de

Nemours & Co., 2007 Del. LEXIS 221, at *20-*22 (Del. May 15, 2007);

Eagle Indus. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232-33

(Del. 1997).




      3
       It is possible that the only reasonable reading of the
 contractual purpose is the OmegaTech stockholders’ position. But
 we leave this issue for further development. We also leave open
 the issue of whether Martek, by virtue of its representations to
 the FDA in its nutrient content claim notification, should be
 judicially estopped from asserting that the milestone was not
 achieved.

                                      -14-
     In sum, the ambiguities in the milestone provision require

factfinding as to what precisely the parties bargained for and

whether Martek has received the benefit of that bargain. See Brehm

v. Eisner, 906 A.2d 27, 69 (Del. 2006).



                                        III

     Because we find the relevant milestone provision ambiguous, we

proceed   to    determine     whether    the    OmegaTech     stockholders     have

presented enough extrinsic evidence to create a question of fact

about the parties’ shared intent and therefore to defeat Martek’s

motion for summary judgment.

     Taking     the    evidence    in   the    light   most   favorable   to    the

OmegaTech stockholders, the record supports the conclusions that

the purpose of the milestone provision was to reward OmegaTech’s

stockholders for the ability to make nutrient content claims and

that Martek has therefore received the benefit of the bargain.

Because the parties wanted a shorter earn-out period than would be

needed to await final FDA approval of a nutrient content claim, the

milestone      was    keyed   to   publication     of    a    report   reasonably

calculated to support approval of a nutrient content claim.                    This

is supported by the milestone’s tracking of the statutory terms

governing FDA approval of nutrient content claims, as well as the

explicit allusion to a report that “permits application to the

[FDA] pursuant to the Food and Drug Administration Modernization


                                        -15-
Act.”       Compare J.A. 120-21 (“If the National Academy of Sciences

.   .   .    makes   an   authoritative       statement”)   with   21   U.S.C.   §

343(r)(2)(G)(I) (“the National Academy of Sciences or any of its

subdivisions has published an authoritative statement”); compare

J.A. 120-21 (“citing a specific milligram level”) with 21 U.S.C. §

343(r)(2)(G)(I) (“which identifies the nutrient level to which the

claim refers”). The reference to and use of the statutory language

reflects a single purpose of obtaining permission to make nutrient

content claims relating to DHA.           Thus, in the light most favorable

to OmegaTech stockholders, the approval of the nutrient content

claim would prove a fortiori that the recommendation was sufficient

to meet the business goals of the merger agreement.

        Parol evidence likewise suggests that the milestone was simply

intended to reward the ability to make nutrient content claims, a

reward well-earned in view of the FDA’s actions. For example, Kent

Meager, former chairman of the board of OmegaTech, testified in

deposition that:

        I recall being delighted by some of its language,
        specifically the language permits, because there was
        concern associated with the timing of actually getting a
        nutrient content claim, what I considered to be the
        ultimate objective of the milestone.

                                 *        *       *

        [The milestone] changed to simply not have as the
        objective a filed and allowed nutrient content claim, but
        simply the permission or permitted notification slash, as
        this is termed, application.

                                 *        *       *

                                     -16-
     It was basically saying that if the report came out with
     something that distinguished DHA such that you could make
     -- and had a recommendation -- such that you can make a
     notification under FDAMA for a nutrient content claim,
     that rather than having us wait through the process of
     will the FDA grant it or not, that we would -- the
     milestone would be considered achieved and the shares
     would be distributed.

(Emphasis added).   Robert Di Scipio, former general counsel of

OmegaTech, testified similarly by affidavit:

     While OmegaTech realized the importance of securing a
     Nutrient Content Claim for [DHA] for Martek, OmegaTech
     did not want to wait two to three years until a Nutrient
     Content Claim was achieved under the FDAMA procedures to
     receive payment on the Nutrient Content Claim Milestone.

     Martek’s CFO, Pete Buzy, indicated that he also did not
     want to wait until a Nutrient Content Claim was achieved
     to pay off the Nutrient Content Claim Milestone, because
     he did not want the Martek shares escrowed for the
     milestones to be outstanding for that long.

     The Martek and OmegaTech negotiators agreed that the
     milestone should be paid if it appeared that a Nutrient
     Content Claim for [DHA] could be secured. Both companies
     agreed that the Nutrient Content Claim Milestone would be
     deemed achieved if an anticipated [Report] contained a
     statement regarding [DHA] that would simply permit
     application for a [DHA] nutrient content claim so that
     OmegaTech shareholders would be paid before the FDAMA
     process even got underway. Accordingly, OmegaTech and
     its shareholders would not be waiting for payment on the
     Nutrient Content Claim Milestone while the notification
     worked through the system.

                          *     *      *

     At all times during the negotiations, the intended
     purpose of the Nutrient Content Claim Milestone, . . . ,
     was to achieve a Nutrient Content Claim for [DHA] that
     did not include LNA.

Mark Braman, then-CEO of OmegaTech, testified:



                               -17-
     Both OmegaTech and Martek realized the National Academy
     of Science/Institute of Medicine Report making an
     authoritative statement identifying a nutrient value for
     DHA was a lower hurdle (trigger) for achieving the
     milestone than actually obtaining a DHA nutrient content
     claim, and agreed that if the Report simply “permitted”
     the filing of an application (notification) for a [DHA]
     nutrient content claim, under the FDAMA, then the
     “Nutrient Content Claim Milestone” would be considered
     achieved.

                          *     *      *

     At no time during the negotiations did the parties
     discuss or express the idea that a nutrient content claim
     for [DHA] could be achieved pursuant to the FDAMA without
     satisfying the “Nutrient Content Claim Milestone”.

Finally, the chief negotiator for OmegaTech, Jim Flatt, who later

went to work for Martek, testified in deposition:

     Q.   So there would be a benefit to Martek if a nutrient
          content claim could be obtained for DHA; correct?

     A.   Correct.

     Q.   And the purpose of the milestone was to reflect
          that; correct?

                          *     *      *

     A.   The purpose of this milestone was to reflect an
          achievement or a fairly objective and specific
          achievement, it would represent a step towards the
          nutrient content claim.    Because, again, if you
          reviewed the milestone, it is based on the National
          Academy of Sciences making an authoritative
          statement regarding a very DRI, or dietary
          reference intake for DHA as specified milligram
          level that would be sufficient to allow one to
          apply for a nutrient content claim under FDAMA.

          So the milestone, in my understanding and the
          intent at that time, did not reflect the issuance
          of the nutrient content claim but rather the
          issuance of a report that would serve as an


                               -18-
          authoritative statement that would allow for the
          nutrient content claim to be filed for.

     Q.   In other words, under the milestone, a nutrient
          content claim did not necessarily have to be
          achieved?

     A.   That’s correct.

     Q.   You simply had to have the prerequisites to obtain
          a nutrient content claim; correct?

     A.   To have one of          the   princip[al]     prerequisites,
          that’s correct.

The remainder of Flatt’s deposition suggests that all discussion

revolved around what criteria would be required to predict whether

the Report was sufficient to permit a nutrient content claim.

     All of this testimony supports the position of the OmegaTech

stockholders that the specific criteria for the necessary Report

existed only to predict when the FDA would allow a nutrient content

claim, and that once such a claim had been approved, Martek had

received the benefit of the bargain.           But there is also at least

some evidence that supports Martek’s position that the parties

bargained for a specific kind of recommendation, rather than simply

one that was sufficient to justify a nutrient content claim.

Taking the evidence in the light most favorable to the OmegaTech

stockholders,   however,    the     evidence    would    amply   support    a

reasonable   factfinder    in   concluding      that    the   milestone    was

achieved; that Martek received the benefit of the bargain; and that

therefore Martek owes the performance promised under the milestone.



                                    -19-
There is therefore a genuine dispute of material fact that should

not have been resolved on a motion for summary judgment.

     Accordingly, the judgment of the district court is vacated,

and the case is remanded for further proceedings.



                                             VACATED AND REMANDED




                              -20-
