                                                                                                                           Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


1-19-2006

Trustees Boston v. Ligand Pharm
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-4449




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"Trustees Boston v. Ligand Pharm" (2006). 2006 Decisions. Paper 1741.
http://digitalcommons.law.villanova.edu/thirdcircuit_2006/1741


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                                                              NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT

                                    ___________

                               Nos. 03-4449, 04-1358
                                    ___________


                     TRUSTEES OF BOSTON UNIVERSITY;
                       LEON C. HIRSCH; TURI JOSEFSEN;
                    GERALD CASSIDY; LORETTA P. CASSIDY


                                          v.

                       LIGAND PHARMACEUTICALS, INC.,

                                           Appellant


                   On Appeal from the United States District Court
                               for the District of Delaware
                             (D.C. Civil No. 02-cv-01312)
                 Chief District Judge: The Honorable Sue L. Robinson
                                       ___________


                              ARGUED JUNE 29, 2005

             Before: SMITH, FISHER, and *NYGAARD, Circuit Judges.


                               (Filed January 19, 2006)




*Judge Nygaard assumed senior status July 9, 2005.
William F. Sullivan Esq. (ARGUED)
Colleen E. Huschke, Esq.
Paul, Hastings, Janofsky & Walker
3579 Valley Centre
San Diego, CA 92130

Arthur L. Dent, Esq.
Potter, Anderson & Corroon
1313 North Market Street
6 th Floor, P. O. Box 951
Wilmington, DE 19801

      Counsel for Appellant

John F. Sylvia, Esq. (ARGUED)
Paul P. Poth, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo
One Financial Center
Boston, MA 02111

William O. LaMotte, III, Esq.
Morris, Nichols, Arsht & Tunnell
1201 North Market Street
P. O. Box 1347
Wilmington, DE 19899

      Counsel for Appellees
                                      ___________

                               OPINION OF THE COURT
                                    ___________
NYGAARD, Circuit Judge.

      This is a breach of contract action disputing Appellant Ligand Pharmaceuticals’

right to withhold $2.1 million of the consideration due to Appellees1 (“Trustees”) under



1        Appellees, all former shareholders of Seragen, Inc., include Trustees of Boston
                                                                              (continued...)

                                             2
the terms of a Merger Agreement. The specific dispute centers on how to interpret the

definition of “Parent Damages” in Section 8.1(d) of the Merger Agreement. The District

Court granted summary judgment in favor of Trustees, awarded prejudgment interest to

Trustees and granted the Trustees’ motion to amend the judgment. On appeal, Ligand

argues that the District Court erred on all three aspects. Additionally, Ligand claims that

the District Court inappropriately disregarded evidence of fees and costs Ligand has

incurred in defense of the Oliver litigation in calculating the amount of prejudgment

interest due. We will affirm.

       In May 1998, Ligand and Seragen, Inc. entered into a Merger Agreement, which

provided that Seragen would merge into a wholly-owned subsidiary of Ligand. As

consideration for the merger, Ligand was obligated to make certain payments to the

former shareholders of Seragen. The Merger Agreement provided for an initial payment

of $30 million in cash and Ligand common stock and a contingent payment of $37

million in the event that Ligand received final FDA approval for Seragen’s lead

development drug candidate. The latter payment constituted the “Milestone

Consideration.”

       The Merger Agreement provides that Ligand shall have the right to set-off each

stakeholder’s Milestone Consideration due under the Agreement by the amount of Parent




(...continued)
University, Leon C. Hirsch, Turi Josefsen, Gerald Cassidy, and Loretta P. Cassidy.

                                             3
Damages if the amount of aggregate Parent Damages exceeds $250,000. Section 8.1(d)

of the Merger Agreement defines “Parent Damages” as:

       Any and all losses, damages, liabilities, obligations, claims, demands,

       judgments, settlements, governmental investigations, taxes, costs and

       expenses of any nature whatsoever, including the reasonable fees and

       expenses of attorneys, accountants and consultants resulting from, arising

       out of or attributable to a breach of the Company’s representations,

       warranties, covenants, and agreements under this Agreement.




       Ligand obtained final FDA approval and the Milestone Consideration became due

no later than August 5, 1999. On or about July 27, 1999, Ligand sent notices to Trustees

of its intent to withhold approximately $2.1 million from the Milestone Consideration. In

support of its position, Ligand claimed that it would suffer Parent Damages as a result of

the claims against it in the Oliver litigation. That suit was filed by Seragen’s common

shareholders in the Delaware Court of Chancery. Although the case remains pending, the

Court of Chancery dismissed all claims against Seragen and Ligand on July 25, 2000.

       When Ligand withheld part of the Milestone Consideration, Trustees filed an

action in the United States District Court for the District of Massachusetts, pleading three

counts: breach of contract, breach of implied covenant of good faith and fair dealing and

unfair and deceptive trade practices. Upon petition and agreement among all parties, the



                                             4
case was transferred to the United States District Court for the District of Delaware.

       After the transfer, the District Court granted Ligand’s motion to dismiss the third

count after converting it to a motion for summary judgment. Thereafter, Ligand filed a

summary judgment motion on the remaining two claims, and Trustees filed a cross

motion for summary judgment. The District Court granted Trustees’ cross motion for

summary judgment on November 5, 2003 under the “Parent Damages” clause. The Court

held that “claims” and “demands” required that a specific amount had to have been

“judged due and owing” at the time of withholding. Because Ligand conceded, in its

reply brief filed September 22, 2003, that it had neither paid any amounts to the Oliver

litigation plaintiffs nor incurred more than $250,000 in fees and costs in defense of the

litigation as of that date, the Court denied Ligand’s motion for summary judgment.

       On November 14, 2003, Trustees filed a motion to amend the judgment pursuant to

Rule 59(e) of the Federal Rules of Civil Procedure seeking reimbursement of the withheld

portion of the Milestone Consideration and prejudgment interest. In response, Ligand

argued that it was entitled to deduct from the Milestone Consideration fees and costs

incurred to date in defense of the Oliver litigation. Ligand provided an affidavit by its

General Counsel declaring that Ligand had incurred $567,100.71 in fees and costs in

defense of the Oliver litigation as of November 14, 2003. On January 9, the District Court

granted Trustees’ motion and found that prejudgment interest was due, appropriately

calculated from August 9, 1999. The District Court did not consider Ligand’s evidence



                                             5
of fees and costs incurred as of the motion to amend date because it found the evidence to

be untimely and unsupported by the record.

A.     Claim for Potential Parent Damages

       The District Court concluded that Ligand could not lawfully retain the $2.1 million

that it withheld from Trustees. Ligand’s sole reason for withholding Trustees’ funds is

that the Oliver litigation may someday result in liability. Specifically, Ligand argues that

the “threat” that it will be obligated to pay compensation and Seragen’s “potential”

indemnification obligations justifies withholding a portion of the Milestone

Consideration. However, the Merger Agreement language unambiguously provides

withholding only for actual monetary loss suffered by Ligand. Under the Agreement,

Ligand could set-off a portion of the Milestone Consideration only if it sustained actual

monetary loss in excess of $250,000 as of August 5, 1999, the date the Milestone

Consideration was due. Because Ligand conceded that it had neither paid any amounts to

the Oliver litigation plaintiffs nor incurred more than $250,000 in fees, it is undisputed

that Ligand sustained no actual money damages – damages due and owing – as of that

date. The District Court’s grant of summary judgment in favor of Trustees as to the

potential Parent Damages was proper.2



2.      We do not address whether Ligand may, under section 8.1(a) of the Agreement,
commence an independent action against Trustees to recover actual monetary losses
incurred after August 5, 1999. The relevant issue for purposes of this appeal is whether,
under section 8.1(b) of the Agreement, Ligand was entitled to offset these losses from the
                                                                             (continued...)

                                              6
B.     Award of Prejudgment Interest

       Ligand also contends that the District Court abused its discretion by granting

Trustees’ motion to amend the judgment. Ligand concedes that a motion to amend

judgment is the proper means to calculate and award interest after judgment but disputes

the award of prejudgment interest because it is not specifically provided for in the Merger

Agreement. This argument fails because prejudgment interest is available as a matter of

right under Delaware law. See Moskowitz v. Mayor and Council of Wilmington, 391 A.2d

209 (Del. 1978).

       The District Court properly granted prejudgment interest calculated from August 9,

1999 employing the method proposed by Trustees. Because Ligand does not dispute that

Trustees commenced the lawsuit within the applicable statute of limitations, there simply

was no basis for reducing the interest award. Cf. Getty Oil Co., Inc. v. Catalytic, Inc., 509

A.2d 1123, 1125 (Del. Super. 1986).

C.     Claim for Actual Monetary Loss

       Finally, the District Court did not err when it refused to consider evidence of

monetary loss presented in Ligand’s motion in opposition to Trustees’ motion to amend.

No new evidence may be introduced in a Rule 59(e) motion to amend judgment. United

States v. Contents of Accounting Nos. 3034504504 and 14407143 at Merrill, Lynch,




2.      (...continued)
Milestone Consideration.

                                             7
Pierce, Fenner and Smith, Inc., 971 F.2d 974, 987 (3d Cir. 1992). For this reason, the

District Court found Ligand’s introduction of evidence of fees and costs incurred in

defense of the Oliver litigation improper, untimely and unsupported by the record.

       Ligand argues on appeal that because the District Court accepted Trustees’

evidence of the specific amount withheld from and prejudgment interest due to each

plaintiff presented in their Rule 59(e) motion, it should have accepted the affidavit by

Ligand’s General Counsel declaring that Ligand had, as of December 5, 2003, suffered

$567,100.01 in fees and costs in defense of the Oliver litigation.

       Ligand’s argument fails. The evidence Trustees introduced in their Rule 59(e)

motion was not new. Instead, it demonstrated the proper distribution of the withheld

funds – funds to which the Court had already judged Trustees entitled. Since Trustees did

not introduce new evidence, the District Court was not obligated to accept Ligand’s

evidence of fees and costs allegedly incurred in defense of the Oliver litigation. As noted,

Ligand had previously unambiguously declared that it had not incurred more than

$250,000 in fees and costs in defense of the Oliver litigation. Ligand cannot in response

to Trustees’ Rule 59(e) motion, attempt to correct its own procedural errors.

       For the foregoing reasons, we will affirm the District Court’s grant of summary

judgment in favor of Trustees.
