Judge Wallace Allows Fraud Claims to Proceed to Trial in Pharmaceutical Case While Trimming Various Counterclaims for Breach of Contract and Fraudulent Transfer

September 14, 2021

Publication| Commercial Litigation

In Humanigen, Inc. v. Savant Neglected Diseases, LLC, C.A. N17C-07-068 PRW CCLD, Judge Wallace denied a motion for summary judgment by Savant Neglected Diseases (“Savant”), granted in part and denied in part a motion for summary judgment by Humanigen, Inc. (“Humanigen”) and Madison Joint Venture LLC (“Madison” and, together with Humanigen, “H&M”), and granted a motion for summary judgment filed by Nomis Bay Ltd. (“Nomis”). 

This case concerned accusations of fraud and breach of contract relating to a joint venture between Savant and H&M to bring benznidazole to the United States as a treatment for Chagas disease.  As background, Savant and Humanigen entered into a contractual agreement (the “MDC”) to develop benznidazole and pursue FDA approval using Savant’s alleged proprietary data.  When a third party, Chemo Research, beat Humanigen to FDA approval using the very same data Savant represented it had provided to Humanigen on an “exclusive basis,” H&M sued Savant for fraud.  H&M also asserted a breach of contract claim for Savant’s refusal to pay for certain cost overages pursuant to the MDC.  Savant filed counterclaims seeking, among other things, a cut of any recovery secured in a separate New Jersey action brought by Madison against Chemo Research, and damages related to alleged breaches of the MDC.  Savant also brought a fraudulent transfer claim against Nomis, a member of Madison and a creditor of Humanigen.      

In ruling on various motions for summary judgement, the Court first denied Savant’s declaratory judgment claim that it has a right to recover from an ongoing litigation in New Jersey.  Because the New Jersey action would not be resolved in the near future and there was a real possibility that nothing will be recovered, any ruling of Savant’s interest in that litigation was speculative.  Accordingly, Judge Wallace sua sponte determined that Savant’s claim was not ripe and dismissed it.

The Court also granted Nomis and H&M summary judgment on two of Savant’s claims.  First, the Court granted Nomis’s request for summary judgment regarding Savant’s claim that H&M fraudulently transferred the drug development data to Nomis in exchange for debt relief.  The Court concluded that Nomis was not a beneficiary of the transfer and therefore the claim could not proceed.  Second, the Court granted H&M’s request for summary judgment regarding Savant’s claim of breach of contract related to a warrant H&M issued to Savant.  In so holding, the Court concluded that the prevention doctrine did not apply and that H&M’s failure to pursue further drug approval after Chemo Research had obtained FDA approval did not constitute a breach of the MDC.   

Finally, the Court allowed H&M’s fraud and contract claims as well as Savant’s claim seeking money damages to proceed to trial based on disputes of material fact. 

Analysis: This case involved a complex web of pharmaceutical transactions presenting highly technical issues related to a drug development program.  The CCLD has seen an increase of commercial litigation dealing with drug development programs and is becoming a popular venue for resolving such disputes. 

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