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Antrim Pharmaceuticals LLC v. Bio-Pharm, Inc.

United States District Court, N.D. Illinois, Eastern Division

April 19, 2018

ANTRIM PHARMACEUTICALS LLC, Plaintiff,
v.
BIO-PHARM, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          MATTHEW F. KENNELLY UNITED STATES DISTRICT JUDGE

         Antrim Pharmaceuticals LLC sought to manufacture and sell generic pharmaceuticals. Antrim began to work with Bio-Pharm, Inc. a contract manufacturer, to produce two drugs, but their arrangement collapsed after Bio-Pharm withheld shipment of one of the products. Antrim has sued Bio-Pharm for breach of contract and unjust enrichment. Bio-Pharm has counterclaimed against Antrim, asserting claims of promissory estoppel and breach of contract. Both have moved for summary judgment.

         Background

         The present suit arises from a dispute between Antrim and Bio-Pharm involving the production of two generic drugs, escitalopram and ondansetron.[1] The following background focuses on four events leading to the present dispute: the execution of a term sheet outlining a plan to create a new entity, the subsequent dealings between Antrim and Bio-Pharm, Antrim's navigation of the regulatory barriers to its sale of the pharmaceuticals, and the breakdown of the relationship between the two companies.

         I. Term Sheet

         In December 2009, Antrim (then doing business as BrianT Laboratories of Illinois LLC), Bio-Pharm, and S. Zhaveri Pharmakem PVT, Ltd. entered into an agreement regarding a prospective venture. The Court refers to this agreement as the Term Sheet. The Term Sheet was drafted to "formaliz[e] the relationship" between the three entities seeking to form a new entity to produce pharmaceutical products. D.E. 77, Def.'s Ex. 2 at Antrim 0002329. Antrim would own sixty percent of the new venture; Zhaveri and Bio-Pharm would each own twenty percent.

         According to its terms, the Term Sheet was to be replaced by a "Definitive Agreement" within 90 days. It also provided that, "[i]n case a Definitive Agreement is not entered into within the aforesaid period for reason that any of the Parties is not interested in continuing with the subject matter stated herein, then the Agreement the Term Sheet [sic] shall stand terminated . . . ." Id. at Antrim 0002334. Zhaveri departed from the arrangement, but Antrim and Bio-Pharm continued to pursue a business relationship. They never created a new entity.

         II. Antrim and Bio-Pharm's relationship

         In November 2010, approximately a year after creating the Term Sheet, Brian Tambi, one of the owners of Antrim, e-mailed Amit Shah, Bio-Pharm's Vice President of Corporate Development, stating: "As you know we don't have an Agreement as yet. . . . I suggested that we just follow the [Term Sheet] and I will see about making it an operational Agreement." D.E. 77, Def.'s Ex. 7 at BIO-PHARM 013287. Shah responded: "I agree that we should not spend anymore money with lawyers and agreement and we are fine with formailizing [sic] and reactivating the [Term Sheet]." Id.

         The parties continued to discuss the matter in e-mails and otherwise. See D.E. 82, Pl.'s Ex. 34 at Antrim 0002551-53 (Mar. 7, 2012 Tambi e-mail to Shah). In August 2012, Shah sent an e-mail to Tambi in which he described the current status of the parties' relationship: "[Y]ou decided you would continue the relationship with Bio-Pharm. We also showed our interest in receiving some type of equity investment/committment [sic] as we felt that would make the most sense for us so as not to have conflicts and also grow each others businesses in the best possible manner." Id. at Antrim 0002551.

         In January 2013, Shah e-mailed Tambi, writing "[w]e would like to have a final agreement at the moment we just have the Term Sheet." D.E. 77, Def.'s Ex. 8 at Antrim 0001954. Shah also stated: "We feel for the level of work we are putting in to the project during the development and eventual commercialization we would like to have a larger share in the product." Id. In response to Shah's first point, Tambi responded: "Agree-I will finalize the Agreement." Id. He also wrote: "I regret I cannot change the Terms we agreed unless there is something patently unfair. As I countered on the Phone, Amit, I do not find this to be the case. I have been subject to this type of post-Agreement suggestions by Companies in India and I have recinded [sic] the Agreements." Id.

         In subsequent e-mails, Shah and Tambi continued to dispute whether Bio-Pharm was entitled to equity. In July 2015, Shah e-mailed a draft agreement to Tambi that contained a section stating that Antrim and Bio-Pharm would "jointly own the products in a ratio of 75:25%." D.E. 82, Pl.'s Ex. 9 at Antrim 0001252. Tambi deleted the ownership section and replaced it with a term providing for a profit-sharing arrangement in which Bio-Pharm would receive twenty-five percent and Antrim seventy-five percent of the profits over the commercial life of the product. .Id.

         Antrim contends that, during the same period the e-mails were exchanged, Shah and Tambi engaged in phone conversations about their arrangement. During his deposition, Tambi testified to numerous phone calls he had with Shah, in which he said they agreed to a profit-sharing arrangement, as opposed to an equity share:

Q. Did Amit ever say to you in writing, I understand that Bio-Pharm does not have any equity in Escitalopram?
A. I think that he - he understood that. There are a number of telephone calls where that was acknowledged.
Q. Okay.
A. Now, whether we put it into an e-mail, I don't know, but I will - we will search for it.
Q. Yeah. That's my question, is: Did he ever say that to you in writing?
A. Not in writing, but I think - I am very positive that he said he said he understood that on telephone calls.

Id., Pl.'s Ex. 1 at 245-46. But Tambi also testified that he was not able to "definitively" state that Shah conceded that Bio-Pharm would have no equity share. Id. at 110. Tambi testified that an oral agreement between the parties was formed under which Bio-Pharm would obtain twenty-five percent of the profits over the life of the products and would be compensated for its costs in manufacturing the drug through the proceeds of the sale of the drug. Tambi also testified that Bio-Pharm would be compensated upon sale of the drug based on the cost of production, plus ten percent. Shah likewise testified that Bio-Pharm would be reimbursed from the sales proceeds.

         III. Antrim's ability to market

         Meanwhile, Antrim was also engaged in the process of obtaining regulatory approval to manufacture and market escitalopram and ondansetron. To obtain approval to market the pharmaceuticals, Antrim was required to successfully complete an Abbreviated New Drug Application (ANDA) for approval by the Food and Drug Administration. Part of the ANDA process includes shipping samples of the products for FDA review. Bio-Pharm produced these samples and supplied them for the ANDA. The FDA approved Antrim's ANDA for escitalopram on February 2, 2012. But the FDA has never approved Antrim's ANDA for ondansetron.

         Additionally, Antrim was required to find a third party that could market and distribute the pharmaceuticals that Bio-Pharm produced. At the time, Antrim planned to use Leading Pharmaceuticals, an entity licensed to fulfill this role. The parties dispute whether the relationship was finalized. Antrim also contends that it has secured an agreement with another third-party seller, RxTPL, but it is unclear from the record whether a contract between Antrim and RxTPL exists.

         IV. Bio-Pharm withholds escitalopram

         After the FDA approved the ANDA for escitalopram and as Leading Pharmaceuticals and Antrim were finalizing a distribution agreement, Bio-Pharm withheld shipment of the escitalopram (Bio-Pharm concedes this). Antrim and Bio-Pharm never sold any of the pharmaceuticals Bio-Pharm produced. Bio-Pharm contends that it incurred $277, 000 in manufacturing costs: $152, 000 for escitalopram and $125, 000 for ondansetron. Bio-Pharm alleges that in manufacturing the products, it relied on Antrim's purported promise to provide it with an equity share; it says it withheld the products when Antrim declined to extend the promised equity.

         In January 2016, Antrim sued Bio-Pharm for breach of contract and conversion. The Court later dismissed the conversion claim. Antrim Pharms. LLC v. Bio-Pharm, Inc., 16 C 784, D.E. 21 (N.D. Ill. June 12, 2016). Bio-Pharm has counterclaimed, asserting claims of promissory estoppel and breach of contract. Both parties have moved for summary judgment.

         Discussion

         To prevail on a motion for summary judgment, the movant must "show[] that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). When considering a motion for summary judgment, the Court takes all reasonable inferences and construes all facts in favor of the nonmoving party. Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 706 (7th Cir. 2011). To defeat summary judgment, the nonmoving party must "produc[e] ...


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