Was on vacation while the decision came down and only now had time to read through everything. It seems to boil down to how Parsons is going to deal with the "too speculative" issue. What makes me pessimistic is that the SC didn't challenge his so called "factual" finding that the parties would have come to an agreement that mirrored his damages award had Siga not breached the "Type II" contract to negotiate in good faith. I don't want to take comfort in the fact that the SC remanded it because it still leaves open the possibility of the same award but Parsons just saying that it is now based entirely on contract law and not promissory estoppel. Remember he said in his decision that he was going to kill two birds with one stone by dealing with both the breach of duty to negotiate in good faith AND promissory estoppel at once instead of in two different sections, since both are satisfied with his stupid damages award. So, I don't think this is gonna be a slam dunk case of Parsons not wanting to get reversed twice and reducing the award to just reliance damages or other nominal amount.
I was trying to find a case where a party was awarded lost profits because of the other party breaching the duty to negotiate in good faith. Actually of course I was hoping I WOULDN'T find one, but unfortunately I did: COLUMBIA PARK GOLF v. City of Kennewick, 248 P. 3d 1067 - Wash: Court of Appeals, 3rd District.
- As the dissenting judge said, the award was not called "lost profits" but really that was just semantics
- Note though how Columbia knew that it would be tough to prove "lost profits" so they didn't explicitly ask for that. However they did get them but just called them something else to get around that difficulty.
- Also note how WA has a "new business rule" for determining expectation damages.
Golong, homebuilder, alibi, any thoughts? Have a good weekend everyone.
Thanks for hitting the stacks. I have been pleading with this board to get more minds researching this issue. I agree with csmc that the case you cite is not an appropriate precedent for this case. But I give you an A for effort! I spent quite a bit of time researching the basis for damages awards in breach of contract and didn't find one case where there was an award based on a split of future profits. But searching the internet isn't how professionals do case law research.
What I did find over an over again in law texts is that a new business, one that currently has no profit, and doesn't have a history of demonstrated profitability cannot be subjected to expectation damages because it would be speculative. The reason speculative damages don't meet the test and that a split of future profits isn't equitable is that it permits the injured party to participate in the profits, but it does not factor the possibility that not only could there have been no profit at all, but actually the injured party may have suffered a loss.
So my challenge stands. Find me one case where expectation damages were awarded in the form of a split of future profits for breach of contract. Perhaps the moon is made of green cheese, but I don't think Parsons will make an unprecedented award. He really wants the parties to settle. He has alluded that one side may get nothing. Which side do you suppose he was referring to?
Appreciate your reply Mush. I think your second paragraph is required reading for those people who say a future profit split isn't speculative because if there are no profits then the injured party doesn't get anything. It points out how if there are losses instead of profits, then the injured party doesn't have to participate in any of that. There is only potential upside for the injured party and no downside. So it speculates a profitable rather than a unprofitable future which is even more speculative considering it is a new business.
When Parsons made that comment about one side getting nothing, correct me if I'm wrong but this may have been in the context of admonishing Pip for not protecting themselves by writing up a more ironclad agreement instead of a term sheet with "non-binding" stamped on it. I'm really hopeful now he will have to revisit this whole idea of Pip getting nothing or at least minimal damages. The SC said they were unclear how much of his award was based on promissory estoppel and how much was on breaching type ii. But Parsons has shown both in his original decision and in his denial of Siga's motion for reargument (see my "Reasonable certainty thread") that he mostly if not entirely based it on equity law rather than on contract law. Remember in his decision, he acknowledged that Pip was only able to show about $600k in actual costs they incurred but that this would be "de minimis" for a drug with billion dollar potential. So that's why he had to use promissory estoppel in order to be able to award Pip more even though they chose to leave "non-binding" on the LATS.
This has stuck out since i read the SC decisions. We now turn to the question of what is the proper contractual remedy for
breach of an agreement to negotiate in good faith where the court finds as FACT that
the parties, had they negotiated in good faith, would have reached an agreement.
OUR DECISIONS HAVE NOT CLEARLY ANSWERED THIS QUESTION. This quote tell me that they may not agree with Parsons FACT!!!!!!
Thanks everyone for your replies! CS, really appreciate you taking the time to read the case I found and distinguishing it from Siga's case. In fact the way I found out about the Columbia case was that I was actually looking for expert opinion and reaction from the appeal ruling, and this case was mentioned in one newsletter how Siga was actually not the first time expectation damages were awarded for a breach of a type ii agreement. However the newsletter did add that "One key factor...is the specificity of the underlying term sheets. Each term sheet was extremely detailed and left little to the imagination or to future negotiation. An extremely detailed term sheet is indispensable... but often less is more if you intend the term sheet as merely a starting point for negotiations." Of course that's exactly what Drapkin said the LATS was, just a jumping off point, but Parsons thought everything that came out of Drapkin's mouth was rubbish. With another judge, Drapkin's same testimony could have been given actual consideration. Here is another analysis written by the law firm Morrison and Foerster that also points out the Parsons-boxing-himself-in dilemma: "Actually obtaining expectation damages may be difficult because it requires proof that ...the amount of expectation damages can be calculated with reasonable certainty. ... especially challenging ... require predictions about the future. Indeed, the lower court had previously found that PharmAthene’s claimed damages were too speculative."
Most of the expert analysis I was finding was focusing more on Siga being liable for bad faith and saying stuff like "be very careful when drafting your term sheets!" and "avoid agreeing to negotiate in good faith!" and "don't do business in Delaware!" I only found the above two that were willing to go out on a limb to address the damages part of the ruling, but it's interesting that both are acknowledging the difficulty Pip has due to the "too speculative" issue.
That the LATS was considered by Parsons to be anything more than a jumping off point for negotiations is totally ridiculous. That a two page LATS could be considered adequate to form the entire basis of a hypothetical final license agreement for a potential multi-billion dollar drug product like ST-246 in any non-speculative and meaningful way offends common sense. That the terms of the agreement that the parties would have reached had SIGA "negotiated in good faith" could be knowable by Parsons through anything other than pure, undiluted speculation (14 pages of it) is a matter of faith, not reason.
All that was definitely agreed to (in accordance with the SC ruling) was that the parties would negotiate around an incomplete document missing essential terms that the parties themselves had no intention of being bound to. Even if you take the leap of faith that the contract would have closed if not for SIGA's bad faith, the terms of such a fundamentally speculative, nonexistent, yet-to-be-negotiated contract are unknowable in any meaningful and non-speculative way. Parsons couldn't come up with them, he tried justifying his speculation through promissory estoppel and was reversed.
In the case you cited, Columbia specifically elected to forego any claim for lost profits because profits for a new business are generally “‘too speculative, uncertain, and conjectural to become a basis for the recovery of damages.’” Instead, it rightly contended that the bundle of rights it had acquired by the time of the City’s breach (its 50-year lease, its shoreline permit, its approved site plan, and its exclusivity agreement, all associated with an exceptional recreational property) was assignable and that a market existed for such development rights. Columbia asked the jury to award it the market value of this asset it claimed was destroyed.
I disagree that this is merely a semantic distinction and another way to provide lost profits without saying it, a plaintiff should be able to recover damages if it can show that “a market existed and whether a …… price would have been paid for the bundle of rights in that market.” Pharmathene also made this exact point in SC oral arguments when they were still trying to get a lump sum payment. PIPs lawyer: “So there’s no question how Pharmathene was harmed, it had the right to sublicense this thing. Had it received the license with the economic terms it was entitled to, it could have turned around and sold it.” Of course, PIP’s expectation damages expert was rejected by the CC so, as the SC pointed out, it is impossible to say what it would have sold for. The critical difference is that Colombia was able to show the value of their right (through expert testimony) and that a market existed for it, and thus they were entitled to damages. In contrast, PIP was not able to show the value of their right or even that a market existed for it, and thus were not entitled to damages.
I find this case again strongly supports the point of view that PIP is not going to be able to show lost profits here are not too speculative since the CC and SC have already conclusively found that PIP would not be entitled to receive damages under any theory of damages Columbia prevailed on here. And, as was pointed out by the SC in every case they referenced in their opinion, damages can’t be speculative, and this really is the sticking point for PIP. Parsons is boxed in.
Nice job and summary re the issues that Parsons is now dealing with following the SC decision.
For me, the issue comes down to whether or not Parsons has any intellectual integrity left, or will he simply roll over and play dead for the SC? Is his status amongst his peers, or job security, or possible promotion,
now more important than his factual and legal findings and conclusions that he made in this case more than a year ago?
If he sells out, we lose again. If he holds true to his earlier factual findings, he cannot award expectation damages to PIP as he found such to be too speculative and uncertain to award at the time of trial.
Suddenly, a year or two later, those damages could not have matured into crystal clarity absent something factually new that was not considered at the time of trial.
This is really not an issue of law this time around. What Parsons is compelled to do according to the SC findings is to do is find. or not find, damages in favor of PIP under general contract law. If he contradicts himself 100% from his trial verdict I guess he can do that. Like I said...he either has ethics, or he doesn't.
I'm betting he has some integrity left..
Can SIGA apeal yet again if Parsons rules the same or worse than before? It seems unrealistic that the SC would issue a partial reversal resulting in a worse decision for SIGA than 50/50. And isn't a Solomon slice already priced in at $3.15?
Golong, your comment implies some sort of integrity in Parsons in the first decision. Golong, rank amateurs on the board here were aghast at the first decision, and remarked they found it to be EXACTLY what the SC ultimatly said it was. Rank amateurs AND the SC see it one way, and Parsons stood alone that this was an case of promissory estoppel remedied by half of everything. Gimmie a break. He’s either stupid or prejudice. Either way, inept.
I personally have no respect for Parsons at all, and expect the worst from him. How or why would this decision be any less absurd?
Well, I’m not a lawyer (but I have won a debate by bamboozling my opponent with convoluted rhetoric), yet I will say that I think you have just bout got it. I’d guess Parsons gives a very significant award, justified somehow, even if it takes more obscure law or convoluted semantics. The other reason I think so is that the only people harmed by such a ruling is us. SIGA’s officers will issue more stock, give 30% to the lawyers to appeal, vote themselves more bonuses, and we’ll drop to $2.50. I can’t say what Parsons cut is....
Agree with your logic on Parsons and possibility of same/similar economic terms tied now to Type II agreement as justification for "expectation damages" as a result of bad faith. Appreciate your diligence and honesty with regard to finding another case where some form of expectation/lost profit was awarded to offended party for bad faith of counter party. On the positive front (from SIGA perspective) I believe clearing uncertainty could turn out to be a positive (even at terms Parsons initially proposed) because investors can finally move past uncertainty of outcome for litigation and instead focus on certainty of cash flows and profits from the BARDA contract. Like most investors I know, when I hear government contract, I think low margins. However, that is not the case with this contract. It can and will still be lucrative even if they never get FDA approval.