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Terumo Americas Holding, Inc. v. Tureski

United States District Court, D. Massachusetts

May 1, 2017

TERUMO AMERICAS HOLDING, INC., Plaintiff and Counterclaim-Defendant,
v.
GARY D. TURESKI, in his capacity as Sellers' Representative, Defendant and Counterclaim-Plaintiff.

          MEMORANDUM AND ORDER

          Denise J. Casper United States District Judge

         I. Introduction

         Plaintiff and Counterclaim-Defendant Terumo Americas Holding, Inc. (“Terumo”) has brought this declaratory judgment action against Defendant and Counterclaim-Plaintiff Gary D. Tureski (“Tureski”), in his capacity as Sellers' Representative, seeking a declaration of the parties' rights and obligations pursuant to an Agreement and Plan of Merger (the “Agreement”) entered into by the parties on April 1, 2011. D. 1. Tureski has asserted counterclaims against Terumo for breach of contract in failing to use commercially reasonable efforts (Count I) and for failure to comply with the Sellers' Representative's requests for information (Count II). D. 7. Tureski also asserts counterclaims for a declaratory judgment that certain of Terumo's actions were in violation of the Agreement (Count III) and for specific performance in the form of an order directing Terumo to respond to information requests made by the Sellers' Representative (Count IV). Id. Terumo has now moved for summary judgment on all counterclaims against it. D. 125. For the reasons discussed below, the Court ALLOWS Terumo's motion.

         II. Standard of Review

         The Court grants summary judgment where there is no genuine dispute on any material fact and the undisputed facts demonstrate that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A material fact is one that “carries with it the potential to affect the outcome of the suit under the applicable law.” García-González v. Puig-Morales, 761 F.3d 81, 87 (1st Cir. 2014) (internal quotation mark omitted) (quoting Newman v. Advanced Tech. Innovation Corp., 749 F.3d 33, 36 (1st Cir. 2014)). The moving party bears the burden of demonstrating the absence of a genuine issue of material fact. Rosciti v. Ins. Co. of Pa., 659 F.3d 92, 96 (1st Cir. 2011) (citation omitted). Once that burden is met, the non-moving party may not rest on the allegations or denials in his or her pleadings, Murray v. Warren Pumps, LLC, 821 F.3d 77, 83 (1st Cir. 2016) (citation omitted), but, “with respect to each issue on which [he or she] would bear the burden of proof at trial, ” must “demonstrate that a trier of fact could reasonably resolve that issue in [his or her] favor, ” Borges ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 5 (1st Cir. 2010) (citations omitted). The Court views the record in the light most favorable to the non-moving party and “draw[s] reasonable inferences” in their favor. Noonan v. Staples, Inc., 556 F.3d 20, 25 (1st Cir. 2009) (citation omitted). “Conclusory allegations, improbable inferences, and unsupported speculation, ” however, are “insufficient to establish a genuine dispute of fact.” Travers v. Flight Servs. & Sys., Inc., 737 F.3d 144, 146 (1st Cir. 2013) (internal quotation mark and citation omitted).

         III. Factual Background

         Unless otherwise noted, the following facts are drawn from the parties' statements of material facts, D. 127, 131, 141, 147, and are undisputed.

         A. The Agreement

         Terumo and certain selling stockholders of Harvest Technologies, Inc. (“Harvest”), including Tureski, (“the Sellers”), are parties to the Agreement which was entered into on April 1, 2011. D. 127 ¶¶ 1, 3, 15; D. 131 ¶¶ 1, 3, 15. Tureski is a “Seller, ” the “Sellers' Representative” and the “Plan Manager, ” as defined in the Agreement. D. 127 ¶¶ 5-7; D. 131 ¶¶ 5-7. Pursuant to the Agreement, Terumo acquired 100% of Harvest's outstanding shares, D. 1 ¶ 10; D. 7 ¶ 10, and the “Transaction Closing” was held on April 29, 2011, D. 127 ¶ 16; D. 131 ¶ 16.

         Harvest is “an innovative biotechnology company working to commercialize the world's first point-of-care technology that allows physicians to derive highly concentrated autologous, adult stem cells from their patients in just 15 minutes.” D. 1 ¶ 10; D. 7 ¶ 10. When the parties entered into the Agreement, Harvest “was conducting clinical research exploring the treatment of end-stage Critical Limb Ischemia (“CLI”), a result of Peripheral Arterial Occlusive Disease, which often leads to lower-limb amputation and increased patient morbidity and mortality rates.” D. 1 ¶ 11; D. 7 ¶ 11. Specifically, Harvest was working to develop treatments using “autologous bioactive cells.” D. 7 at 9 ¶ 13; D. 18 ¶ 13. Prior to executing the Agreement, Harvest submitted a “CLI Investigational Plan, ” as revised (“the Plan”), to the Federal Drug Administration (“FDA”). D. 127 ¶¶ 56-57; D. 131 ¶¶ 56-57. The Plan was approved by the FDA on March 3, 2011. D. 127 ¶ 58; D. 131 ¶ 58. The Plan provided for, among other things, a 210-patient clinical trial (the “CLI Pivotal Clinical Trial”) to study the efficacy of Harvest's CLI treatment. D. 7 ¶ 15; D. 18 ¶ 15. The Plan, referred to in the Agreement as the “CLI Development Plan, ” is attached to the Agreement as Exhibit 1.6(b)(v). D. 127 ¶ 60; D. 131 ¶ 60.

         Terumo paid the Sellers $70 million in “base merger consideration” to acquire Harvest. D. 127 ¶ 17; D. 131 ¶ 17. Pursuant to the Agreement, the Sellers potentially could have earned up to an additional $35 million in “milestone payments” corresponding to the achievement of aspects of the Plan and development of the CLI treatment. D. 127 ¶ 19; D. 131 ¶ 19. For example, the Sellers would be entitled to a $5 million payment “upon completion of enrollment of 105 of the 210 patients” in the CLI Pivotal Clinical Trial and to a $12.5 million payment upon written notice from the FDA of “CLI FDA Clearance/Approval.” D. 127 ¶ 19; D. 131 ¶ 19.

         Section 1.6(c)(ii) of the Agreement requires Terumo to use “Commercially Reasonable Efforts to effectuate and fund” the Plan “with a commitment to provide up to $6, 000, 000 in funding for the CLI Development Plan . . . .” D. 127 ¶ 61; D. 131 ¶ 61. Section 1.6(b)(xi) defines “Commercially Reasonable Efforts” as:

[T]he level of efforts and resources (provided that the Purchaser [Terumo] shall not be required to provide the Surviving Corporation with more than $6, 000, 000 in funding for the CLI Development Plan or more than $600, 000 in funding for the MYO Development Plan) at least equal to those normally used by the Purchaser and its Affiliates, taken as a whole, to conduct the relevant activity in an expeditious manner, including, in the case of development, manufacture or commercialization, the level of effort and resources at least equal to those normally used to develop, manufacture or commercialize, as the case may be, a product that has been developed internally, which product is at a similar stage in its development or product life and is of a similar market and profitability potential to the products and/or treatments addressed in this Section 1.6.

D. 127 ¶ 62; D. 131 ¶ 62.

         The Agreement provides that the Plan shall be directed within its scope by the Plan Manager, Tureski, in reasonable consultation with Terumo, D. 141 ¶ 7; D. 147 ¶ 7, and entitles the Plan Manager to certain categories of documents, financial statements and information in possession of Terumo and its affiliates, D. 141 ¶¶ 9-11; D. 147 ¶¶ 9-11. The Plan Manager is obligated to, among other things, “use best efforts to effectuate the CLI Development Plan.” D. 127 ¶ 41; D. 131 ¶ 41.

         B. Projections, Negotiations and Modifications of the Agreement

         The Agreement was the result of negotiations which included detailed discussions between the parties, see D. 127 ¶ 21; D. 131 ¶ 21, and each party, including Harvest, was represented by counsel, D. 127 ¶¶ 25-27; D. 131 ¶¶ 25-27. Tureski participated in a meeting in New York City in March 2011 to negotiate the Agreement, D. 127 ¶ 22; D. 131 ¶ 22, and multiple drafts of the Agreement with proposed changes to Section 1.6 were circulated between the parties. D. 127 ¶ 23; D. 131 ¶ 23.

         Prior to entering into the Agreement and the Transaction Closing date, the parties exchanged various forecasts and “draft plans” regarding Terumo's acquisition of Harvest. See, e.g., D. 141 ¶¶ 14, 26, 30, 34, 37, 60; D. 147 ¶¶ 14, 26, 30, 34, 37, 60. The parties dispute whether certain of those forecasts and draft plans estimating around $6 million in costs for the CLI Pivotal Clinical Trial included “internal Harvest salaries and other internal expenses.” See, e.g., D. 141 ¶¶ 18-19, 26, 37, 42-43, 61; D. 147 ¶¶ 18-19, 26, 37, 42-43, 61. Certain draft plans included “Salaries & benefits” and “Travel & Entertainment” under the Sales, General and Administrative expenses (“SG&A”) schedule, D. 141 ¶ 51; D. 147 ¶ 51, and a version of a document created in 2011by Harvest's Chief Financial Officer at the time purportedly “budgeted items that were reflective in the contract” lists “Harvest Travel & Misc.” as an item, see D. 141 ¶¶ 15, 60-62; D. 147 ¶¶ 15, 60-62.

         The Agreement was modified in writing, as required, six times between July 25, 2011 and January 1, 2014. D. 127 ¶¶ 33-39; D. 131 ¶¶ 33-39. In 2012, Tureski was made aware of increasing costs for the CLI Pivotal Clinical Trial and he never asked to amend or modify the $6 million funding obligation in the Agreement. D. 127 ¶¶ 28-30; D. 131 ¶¶ 28-30. Parts of Section 1.6 were modified in writing in 2013, se ...


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