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Takeda Pharmaceuticals U.S.A., Inc. v. Spireas

United States District Court, E.D. Pennsylvania

September 4, 2019

TAKEDA PHARMACEUTICALS U.S.A., INC., et al., Plaintiffs,
v.
SPIRIDON SPIREAS, Defendant.

         TABLE OF CONTENTS

         I. INTRODUCTION .................................................................................................................. 4

         II. BACKGROUND .................................................................................................................... 6

         A. Spireas And Bolton Develop And Patent Their Liquisolid Technology And Form Hygrosol Pharmaceutical Corporation To Market The Technology ................................ 6

         B. Mutual PA And United Enter Into An Agreement (“1998 Agreement”) With Spireas, Bolton, And Hygrosol To License The Liquisolid Technology To Develop Generic Drug Products ..................................................................................................... 7

         C. Spireas and Bolton Receive Four (4) Liquisolid Technology Patents ........................... 10

         D. Spireas Begins Working for Mutual PA, And Mutual PA And United License The Liquisolid Technology from Hygrosol to Develop Felodipine and Propafenone ........... 11

         E. Mutual PA And United Remit Royalty Payments To Hygrosol For Felodipine And Propafenone Drugs Pursuant To The 1998 Agreement .................................................. 13

         F. In 2011, Mutual PA And United Sue Spireas, Bolton, And Hygrosol In State Court .... 16

         G. Takeda Pharmaceuticals Acquires Mutual PA And United In 2012, And Sells The Generic Drug Business Of Mutual PA And United To Sun Pharmaceutical in 2013 .... 17

         H. In 2013, The Internal Revenue Service (“IRS”) Challenges Spireas' Treatment Of The Hygrosol Royalty Payments ................................................................................... 18

         I. Ensuing Procedural History Of This Case ..................................................................... 19

         III. STANDARD OF REVIEW .................................................................................................. 24

         IV. ANALYSIS ........................................................................................................................... 25

         A. Mutual Delaware Has Standing To Sue Under The 1998 Agreement ........................... 26

         B. United Has Standing To Sue Under The 1998 Agreement ............................................ 27

         C. Genuine Disputes Of Material Fact Exist As To Whether United Paid Royalties To Hygrosol Under The 1998 Agreement ...................................................................... 31

         1. Enough Evidence Has Been Offered To Create Genuine Disputes Of Material Fact As To Whether United Made Royalty Payments Under The 1998 Agreement From 2002 To 2013 ............................................................ 32

         2. Genuine Disputes Of Material Fact Exist As To Whether Mutual Delaware, A Successor To United, Made Royalty Payments Under The 1998 Agreement ... 35

         D. Genuine Disputes Of Material Fact Exist As To Whether Spireas Received Royalty Payments From Hygrosol For Felodipine And Propafenone Under The 1998 Agreement ...................................................................................................... 36

         1. Hygrosol Received Royalty Payments Under The 1998 Agreement And Then Distributed The Royalty Payments To Spireas And Bolton ........................ 38

         2. Whether The Royalty Payment Passed Through Hygrosol Before Reaching Spireas Has No. Effect On Mutual Delaware's Claim For Money Had And Received ................................................................................................................ 40

         3. On Its Claim for Breach of Contract, Mutual Delaware Is Entitled To Seek Royalty Payments Made By United To Hygrosol Under The 1998 Agreement ... 41

         E. The October 2018 Settlement Agreement Between Takeda, Spireas, And Hygrosol Does Not Preclude Mutual Delaware's Claims ..................................... 45

         F. Genuine Disputes Of Material Fact Exist As To Whether Mutual Delaware And United Made Royalty Payments Under The 1998 Agreement Voluntarily As A Result Of An Unprovoked Mistake Of Law ............................................................... 48

         G. Spireas Is Not Entitled To Summary Judgment Based On Claim Preclusion ................ 49

         H. Genuine Disputes Of Material Fact Preclude Judgment As A Matter Of Law On Spireas' “Companion” Motion For Summary Judgment On Mutual Delaware's Claim For Money Had And Received Based On False Pretenses ............................................ 52

         1. Mutual Delaware Is Not Required To Prove Fraud In Order To Maintain Its Claim For Money Had And Received .............................................................. 53

         2. Genuine Disputes Of Material Fact Have Been Shown As To Whether Spireas Made Material Misrepresentations to Mutual PA And/Or United In Connection With The 1998 Agreement ................................................................. 54

         3. Genuine Disputes Of Material Fact Have Been Shown As To Whether Mutual PA And/Or United Justifiably Relied On Spireas' Representations That They Were Selling Drugs That Contained The Patented Technology .......... 56

         V. CONCLUSION ..................................................................................................................... 59

          OPINION

          SLOMSKY, J.

         I. INTRODUCTION

         On June 12, 1998, Defendant Spiridon Spireas (“Spireas”), his business partner, Dr. Sanford Bolton (“Bolton”), [1] and the company they formed together, Hygrosol Pharmaceutical Corp. (“Hygrosol”), executed a licensing agreement (the “1998 Agreement”) with Mutual Pharmaceutical Company, Inc., a Pennsylvania corporation (“Mutual PA”), and its sister corporation, United Research Laboratories, Inc. (“United” or “URL”). Under the 1998 Agreement, Spireas and Bolton, through Hygrosol, granted Mutual PA and United the exclusive right to license their patent-pending “liquisolid technology” to use in formulating and developing generic drug products. Liquisolid technology is a process through which non-soluble drugs can be dissolved and converted into powder or pill form.

         In March of 2000, Mutual PA and United licensed Spireas' and Bolton's now-patented liquisolid technology to develop generic propafenone and felodipine drug products, the active ingredients in the drugs Rythmol and Plendil, which are used respectively to treat irregular heart rates and high blood pressure. Under the terms of the 1998 Agreement, Spireas successfully developed formulations for felodipine and propafenone drug products for Mutual PA and United, after which Mutual PA and United began manufacturing and selling the drugs. In exchange for granting Mutual PA and United the right to their liquisolid technology, Spireas and Bolton received hundreds of millions of dollars from Mutual PA and United as royalties on the felodipine and propafenone products.

         In 2017, Takeda Pharmaceuticals U.S.A., Inc. (“Takeda”), the successor-in-interest to Mutual PA, uncovered testimony that Spireas had given in a tax court proceeding unrelated to this case. During those proceedings, Spireas testified that the formulations he made for propafenone and felodipine under the 1998 Agreement did not use his and Bolton's patented liquisolid technology. Consequently, Takeda filed this case, alleging that Spireas had breached the 1998 Agreement by misrepresenting the formulations of felodipine and propafenone. Takeda sought to recoup the $150 million in royalties that were paid to Spireas under the 1998 Agreement.

         At the motion to dismiss stage of these proceedings, based on Spireas' argument that United was a necessary and indispensable party to this case, the Court ordered that Takeda join Mutual Pharmaceutical Company, Inc. (“Mutual Delaware”), the successor-in-interest to United, as a Plaintiff in this case. Takeda joined Mutual Delaware as a Plaintiff and, together, the parties filed an Amended Complaint against Spireas, alleging a claim for breach of contract (Count I), and claim for money had and received (Count II). In October of 2018, Takeda resolved its claims against Spireas in a settlement and was voluntarily dismissed from the case, leaving Mutual Delaware as the only remaining Plaintiff.

         On February 28, 2019, Spireas filed a Motion for Summary Judgment challenging Mutual Delaware's claims for breach of contract and money had and received (Doc. No. 60), as well as a second Motion for Summary Judgment specifically on Mutual Delaware's claim for money had and received (Doc. No. 61). In the second Motion, Spireas argues for summary judgment on this claim to the extent that Mutual Delaware premises the claim on allegations of Spireas' fraudulent conduct. (Doc. No. 61.) These Motions are ripe for a decision. For the reasons discussed below, the Motions will be denied.

         II. BACKGROUND

         A. Spireas And Bolton Develop And Patent Their Liquisolid Technology And Form Hygrosol Pharmaceutical Corporation To Market The Technology

         While a Ph.D. student at St. John's University, Spiridon Spireas met Sanford Bolton, who became his doctoral advisor. (Appendix (“App.”) 297, 1126.)[2] Together, Spireas and Bolton developed their own “liquisolid technology, ” a process through which insoluble drugs are dissolved in non-volatile solvents and then converted into powder or pill form. (App. 1133-1134.) Subsequently, Spireas and Bolton sought to protect their liquisolid technology in a patent, and they submitted patent application No. 08/658, 514 to the U.S. Patent and Trademark Office (“PTO”) on June 10, 1996. (App. 54-57.)

         On January 2, 1997, while the patent application was still pending, Spireas and Bolton formed Hygrosol Pharmaceutical Corporation (“Hygrosol”). This company was formed to be a vehicle for “explor[ing] commercial interest in their liquisolid inventions.” (Doc. No. 64-1 at 8-9; App. 49, 53.) Hygrosol was organized as a Delaware closely-held corporation, meaning that Spireas and Bolton were Hygrosol's only two shareholders and officers. (App. 46, 53.) Hygrosol was also formed as an S-corporation, which meant that for tax purposes, it did not recognize income at the corporate level, but rather passed any income due through to Spireas and Bolton, who reported the income on their personal tax returns. (App. 47.)

         After forming Hygrosol and while the first patent application for their liquisolid technology was still pending, Spireas and Bolton submitted a second liquisolid patent application (Application No. 08/937, 240) to the U.S. PTO on October 1, 1997. (Doc. No. 64-2 at 9; App. 58.) The second patent application was a “division” of the first application, intended to cover Spireas' and Bolton's “process claims” for the liquisolid technology as opposed to the first application which covered their “product claims.” (App. 1134.)

         B. Mutual PA And United Enter Into An Agreement (“1998 Agreement”) With Spireas, Bolton, And Hygrosol To License The Liquisolid Technology To Develop Generic Drug Products

         In the late 1990s, around the same time Spireas and Bolton were developing and patenting the liquisolid technology, Spireas formed his own pharmaceutical consulting company, SigmaPharm, Inc. (App. 1127.) Through SigmaPharm, Inc., Spireas began consulting with Mutual Pharmaceutical Company, Inc., a Pennsylvania corporation (“Mutual PA”), and became friendly with Richard H. Roberts, M.D., Ph.D. (“Roberts”), the President and Chief Executive Officer of both Mutual PA and Mutual PA's sister corporation, United Research Laboratories, Inc. (“United”).[3] (App. 53, 1127.) At the time, Mutual PA was in the process of trying to develop several generic drug products.

         In 1998, Spireas and Roberts began negotiating an agreement with Mutual PA and United to allow them to license Spireas' and Bolton's liquisolid technology for the development of new generic drugs. On June 1, 1998, in anticipation of entering into an agreement with Mutual PA and United, Spireas and Bolton held an annual meeting for Hygrosol. (App. 53.) At the meeting, Spireas and Bolton agreed to assign Hygrosol their liquisolid patents once the patents were approved so that Hygrosol, as opposed to Spireas and Bolton individually, could license the liquisolid technology to Mutual PA and United. (Id.) Spireas and Bolton recorded their assignment agreement in the minutes of Hygrosol's annual meeting, but otherwise took no steps to legally complete the assignment process.

         On June 12, 1998, Spireas, Bolton, and Hygrosol executed the licensing agreement (the “1998 Agreement”) with Mutual PA and United, giving these two entities exclusive rights to develop drug products using the liquisolid technology. (Doc. No. 64-1 at 4; App. 1-16.) The rights outlined in the 1998 Agreement were as follows:

2.1 Spireas, Bolton and Hygrosol grant to Mutual and United:
2.1.1 The exclusive rights to utilize the Technology to develop products that Mutual, United and Hygrosol, acting in good faith, will unanimously select. Hygrosol, Spireas, and Bolton shall supervise the development of said Products.
2.1.2 The exclusive right to produce, market, sell, promote and distribute (collectively, to “Produce and Sell”) in the markets of the United States of America said Products containing the Technology. Depending on the marketing strategy used for each Product and agreed by both parties, Hygrosol may extend to Mutual and United the exclusive right to Produce and Sell a certain Product on a worldwide basis.

(App. 2.) These rights were triggered once Mutual PA, United, and Hygrosol collectively agreed on a product to develop using the “Technology”:

The period during which Mutual and United shall have the exclusive right to Produce and Sell the Products identified by the parties as described herein commences as soon as: (a) said Product is identified by either party and agreed upon in writing by Hygrosol, Mutual and United; and (b) Mutual and United pay Spireas a sum of $10, 000 as an initial development fee to conduct preliminary feasibility studies related to the Product's development (as further described in Section 5.1 below).

(App. 2 at § 2.2.)

         “Technology” was defined as the technology “which is the subject of the Patent.” (App. 1.) “Patent” was defined in the Agreement as the technology in Spireas' and Bolton's first patent application No. 08/658, 514. (Id.) While application No. 08/658, 514 was still pending at the time the 1998 Agreement was executed, Spireas and Bolton had “obtained notice of allowance of their patent claims” made in the application such that approval of the patent was imminent. (Id.)

         Section 19 of the Agreement memorialized Spireas' and Bolton's anticipated assignment to Hygrosol of the patent based on application No. 08/658, 514:

The parties acknowledge that after the assignment of the Patent from Spireas and Bolton to Hygrosol, Spireas and Bolton will no longer have an individual interest in the Patent or the Technology (except as shareholders of Hygrosol). Accordingly, after such assignment all consents, approvals, actions, and decisions to be made hereunder by Hygrosol, Spireas and Bolton need be made only by Hygrosol. In addition, Hygrosol, Spireas and Bolton represent, warrant and covenant with Mutual and United that during the term of this Agreement each of Bolton and Spireas, acting alone, shall have the authority to bind Hygrosol in all matters relating to this Agreement.

(Id. at 15, § 19.)

         The 1998 Agreement also set forth the way Hygrosol, Spireas, and Bolton would be compensated for granting the rights to the liquisolid technology. The Agreement provided that once Mutual PA and United began making a profit on the drugs developed under the Agreement, Mutual PA and/or United would compensate Hygrosol based on a percentage of that drug's sales:

If Mutual or United submits a New Drug Application (NDA) or an Abbreviated New Drug Application (ANDA) for a Product developed hereunder and manufactures and sells this Product, then twenty percent (20%) of the gross profit will be paid to Hygrosol quarterly.

(Id. at 3, § 4.1.)

         Finally, although the 1998 Agreement was signed by Mutual PA, United, Hygrosol, Spireas, and Bolton, Section 17 provided that the obligations of the parties pursuant to the Agreement would be “binding upon, and shall insure to the benefit of the parties hereto and their heirs, executors, administrators, successors and assigns.” (Id. at 15, § 17.)

         C. Spireas And Bolton Receive Four (4) Liquisolid Technology Patents

         On September 1, 1998, after executing the 1998 Agreement with Mutual PA and United, Spireas and Bolton officially received their first liquisolid technology patent for application No. 08/658, 514 - U.S. Patent No. 5, 800, 834 (the “834 Patent”). (Doc. No. 64-2 at 9; App. 54.) Then, over a year later, on October 19, 1999, Spireas and Bolton were issued their second liquisolid patent based on application No. 08/937, 240 - U.S. Patent No. 5, 968, 550 (the “550 Patent”). (Doc. No. 64-2 at 9; App. 58.)

         Shortly after executing the 1998 Agreement, Spireas and Bolton submitted an application for a third liquisolid patent on August 19, 1998. (App. 62.) Based on this application, Spireas and Bolton received U.S. Patent No. 6, 096, 337 (the “337 Patent”) on August 1, 2000. (Id.) The 337 Patent was a “continuation-in-part” of the 834 and 550 Patents, covering additional specifications for the liquisolid technology products and processes. (Id.) On May 10, 2000, before the 337 Patent was approved, Spireas, without Bolton, submitted an application for a fourth and final liquisolid patent. (Id. at 66.) On July 23, 2002, the application was approved and Spireas received U.S. Patent No. 6, 423, 339 (the “339 Patent”). (Id.) The 339 Patent was a “continuation” of the 834, 550 and 337 Patents. (App. 66, 1135.)

         Although Spireas and Bolton were supposed to assign their liquisolid patents to Hygrosol immediately upon issuance, Spireas admitted during his deposition that neither he nor Bolton knew how to accomplish the assignment process. (App. 1133.) It was not until Spireas received the advice of counsel in October of 2006 that he formally assigned all four liquisolid patents to Hygrosol. (App. 574, 1133, 1135.)

         D. Spireas Begins Working For Mutual PA, And Mutual PA And United License The Liquisolid Technology From Hygrosol To Develop Felodipine And Propafenone

         In the late 1990s, Mutual PA was in the process of trying to develop generic felodipine and propafenone drugs, which are the active ingredients in the drugs Plendil and Rythmol, used respectively to treat high blood pressure and irregular heart rates. (Doc. No. 64-1 at 16-18.) Mutual PA was interested in developing generic propafenone and felodipine because no other company had yet done so. However, Mutual PA's efforts at the time were proving to be unsuccessful. For example, for propafenone, Mutual PA had attempted to sub-license the formulation from Knoll Pharmaceutical Company, the maker of Rythmol, but the agreement fell through. (App. 290.) For felodipine, Mutual PA had attempted its own formulation, but was advised that their formulation risked infringing on the Plendil patent owned by AstraZeneca. (App. 200-10.)

         In 1999, in part to overcome the problems in the manufacture of the two drugs, Roberts offered Spireas a job as Mutual PA's Vice President of Research and Development, and Spireas accepted the position. (App. 17, 1139-41.) In this role, Spireas was responsible for overseeing the development of drugs for Mutual PA, which necessarily included Mutual PA's attempts to develop felodipine and propafenone. (Id.) Importantly, Spireas' job responsibilities at Mutual PA were distinct from the obligations he owed to the company under the 1998 Agreement.

         In March of 2000, Mutual PA and United decided to invoke their rights under the 1998 Agreement and license Spireas' and Bolton's liquisolid technology from Hygrosol to develop “generic bioequivalent versions of Rythmol[4] and Plendil Extended-Release[5] . . . .” (App. 32.) On March 7, 2000, Mutual PA, United, and Hygrosol memorialized the license in a letter signed by Roberts, on behalf of Mutual PA and United, and Spireas, on behalf of Hygrosol. (App. 32.) Shortly thereafter, and in accordance with his obligation under the 1998 Agreement to personally oversee the development of drug products, Spireas successfully developed formulations of generic felodipine and propafenone for Mutual PA and United. (Doc. No. 64-3 at 6.)

         On June 6, 2000, Mutual PA submitted an Abbreviated New Drug Application (“ANDA”) to the Food and Drug Administration (“FDA”) for generic felodipine extended-release tablets. (Doc. No. 64-3 at 6; App. 346.) In connection with the felodipine ANDA, “URL/Mutual” created internal product development reports that explained Spireas' formulation for the felodipine tablets. (App. 1024-1052.) The product development reports, among other things, included a broad overview of the development process for felodipine, as well as a detailed review of Spireas' formulation technique. (Id.) In the felodipine report submitted as part of the record for the felodipine 10 mg tablets, the abstract stated as follows:

Extended release tablets containing 10 mg of felodipine, a calcium channel blocker, and denoted as Felodipine ER tablets, 10 mg were developed based on novel methodology relevant to the patented technique of Liquisolid Systems.

(Id. at 1025.)

         On September 28, 2000, Mutual PA submitted an ANDA to the FDA for generic propafenone tablets. (Doc. No. 64-3 at 6; App. 346.) In connection with the propafenone ANDA, “URL/Mutual” compiled propafenone product development reports similar to the ones created for felodipine. (App. 987-1023.) The abstract of the propafenone report submitted as part of the record stated as follows:

Propafenone HCI tablets containing 300 mg of propafenone HCI, an antiarrhythmic agent, were developed based on a novel methodology relevant to the patented technique of Liquisolid Systems (Patent # US5, 968, 550).

(App. 987.) Spireas was an integral part of creating the product development reports for felodipine and propafenone. He testified during his deposition that he was “preparing” or “being consulted for the language, the scientific stuff in any of these product development reports, especially the ones with the high technologies, high tech.” (App. 1146.)

         Following Mutual PA's submission of the ANDAs to the FDA, Mutual PA and, as Mutual Delaware alleges, United, [6] began selling and distributing generic felodipine and propafenone drugs. (Doc. No. 64-1 at 25; Confidential Appendix (“Conf. App.”) 1-7.)

         E. Mutual PA And United Remit Royalty Payments To Hygrosol For Felodipine And Propafenone Drugs Pursuant To The 1998 Agreement

         Beginning in 2002, Mutual Delaware contends that both Mutual PA and United paid royalties to Hygrosol pursuant to the 1998 Agreement based on a percentage of their sales from generic felodipine and propafenone. From 2002 until the first quarter of 2005, Mutual PA and United remitted royalty payments to Hygrosol by check, which were drawn on an account in the name of Mutual PA. (Doc. No. 64-1 at 25; Conf. App. 1-7, 374.) Starting with the second quarter of 2005, Mutual PA and United began remitting royalty payments to Hygrosol via wire transfers, which were also drawn on an account in the name of Mutual PA. (Doc. No. 64-1 at 25, Conf. App. 374.)

         On July 22, 2005, in preparation for the first wire transfer payment, Spireas wrote an email to Richard A. Kremer (“Kremer”), the Director of Finance for Mutual PA and United. (Conf. App. 332.) In the email, Spireas confirmed with Kremer that, “[a]s per our conversation, URL/Mutual will make the payment for the Second-Quarter-2005 royalties due to Hygrosol next week.” (Id.) Spireas also provided Kremer with the wire transfer information for Hygrosol's account. (Id.) On July 29, 2005, Kremer wrote an email to Spireas and Bolton to confirm that Mutual PA and United had remitted a royalty payment to Hygrosol via wire transfer. (Conf. App. 333.) Kremer also attached to his email documentation supporting Mutual PA's and United's royalty calculations. (Conf. App. 335-338.)

         From then on, each wire transfer followed a format similar to the first one. Kremer would accompany Mutual PA's and United's wire transfer with an email and, attached to the email, Kremer would send Hygrosol a formal cover letter and documentation showing a breakdown of Mutual PA's and United's royalty calculations. In his emails, Kremer often stated the amount being transferred into Hygrosol's account were being made to Hygrosol by “URL/Mutual.” (Conf. App. 348, 362, 367, 372, 377, 382, 387, 392, 397, 402, 407, 412, 417, 422, 428, 433, 438, 443.) In the formal cover letters, Kremer would simply state that “Mutual Pharmaceutical Company, Inc.” had completed the corresponding wire transfer to Hygrosol. (Conf. App. 333, 340, 349, 353, 358, 363, 368, 373, 378, 383, 389, 393, 398, 403, 408, 413, 418, 423, 429, 434, 439, 444, 449, 454, 459, 464, 469, 474, 479, 484.) Most of the time, the documentation showing the royalty calculations for felodipine and propafenone were broken down into sales/payments for Mutual PA and United, respectively. (Conf. App. 355-56, 359-60, 364-65, 369, 375, 400, 410, 415, 420-21, 426-27, 431-32, 436-37, 441-42, 446-47, 451-52, 456-57, 461-62, 466-67, 471-72, 476-77, 481-82, 486-87, 489-92.)

         Mutual PA and United kept close track of each wire transfer in their respective books and records. According to the declaration of Susan Perilli, United's Assistant Controller from September 2005 to July 2013, while wire transfer payments to Hygrosol were drawn on Mutual PA 's account, “the payments represented the total amounts of royalties owed by both Mutual PA and URL.” (App. 1422.) After each wire transfer, United “would then make an inter-company transfer to Mutual PA and thereby reimburse Mutual PA for [its] portion of the royalty payments owed under the License Agreement.” (App. 1422-23.) In order to keep track of what United and Mutual PA respectively owed under the 1998 Agreement, “Mutual PA and URL each had their own National Drug Code (“NDC”) labels under which they would sell these generic drugs.” (App. 1420.) Mutual PA and United also used separate “Company Codes” to track their sales of felodipine and propafenone - Mutual PA used assigned Code 100 and United used assigned Code 99. (App. 1422.) Based on their NDC labels and Company Codes, “the allocation of sales, revenues, royalty payments and other expenses between Mutual PA and URL . . . were based on the actual sales that each company separately made of felodipine and propafenone products, and their respective expenses.” (App. 1422.)

         Mutual PA and United remitted royalties to Hygrosol under the 1998 Agreement for felodipine and propafenone until the fourth quarter of 2012. Beginning with the first quarter of 2013, Mutual Delaware took over making the royalty payments in 2013 to 2015 for felodipine and propafenone under the 1998 Agreement. (See Doc. No. 64 at 27-29; App. 133-137.) As explained in more detail below, Mutual Delaware claims that in 2013 it began remitting royalty payments to Hygrosol for felodipine and propafenone because by that time, its parent corporation, Sun Pharmaceuticals Industries, LTD (“Sun Pharma”) had acquired United's generics business, and Mutual Delaware had begun manufacturing and distributing the drugs. (Doc. No. 64 at 27-29.)

         In any event, once Hygrosol received a royalty payment under the 1998 Agreement, the evidence shows that payments would automatically be distributed to Spireas and Bolton. (Doc. No. 64-1 at 27-28; App. 1150-51.) Spireas testified during his deposition that he and Bolton had an agreement under which Spireas would receive fifty-five percent of the payments to Hygrosol for felodipine, and fifty percent of the payments to Hygrosol for propafenone. (App. 1150.)

         F. In 2011, Mutual PA And United Sue Spireas, Bolton, And Hygrosol In State Court

         Although the present action was not initiated until 2017, the parties to the 1998 Agreement were involved in a prior state court action in 2011. On May 5, 2011, Mutual PA and United sued Spireas, Bolton, and Hygrosol in the Philadelphia County Court of Common Pleas for, among other things, breach of contract and fraudulent misrepresentation in connection with the 1998 Agreement. (App. 139.) The state court action arose after Mutual PA and United learned that St. John's University, where Spireas and Bolton had first met, had filed a federal lawsuit against Spireas, Bolton, and Hygrosol, asserting ownership rights to Spireas' and Bolton's liquisolid patents.[7] (App. 139-159.) Consequently, Mutual PA and United sued Spireas and Bolton in state court, ...


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