As has now been post here ad nauseum, Parson's already held at trail that PIP would only be entitled to nominal expectation damages under general contract law. That is why he went the other direction at trail in awarding damages to PIP for "bad faith" negotiations under the equitable doctrine of promissory estoppel.
As we further know, the SC just bounced that award, and remanded it back to Parson's to determine damages under general contract law.
Parson's can't do a 180 now and say to the SC..."I was just kidding about that expectation damages thing at the time of trial. I really do think PIP has a complete and definitive contract with Siga that provided defined foreseeable damages in the hundreds of millions of dollars at the time of the breach (2006). In fact, those damages amounted too 50% of all the net profits from ST-246 from then, until the end of time!"
He's caught in a real mess right now. Make up another "legal theory", only this time under general contract law, and he'll get reversed again. So what is his easiest way out IMHO?
Give PIP an implied license agreement under the construction of the LATs documents, which would
punish Siga to the tune of around 7% of net sales for ST-246, and be done with it. Livable by both
parties really. 7% beats 50% per his earlier verdict, and would be consistent with the concept of
fairness (let's not argue facts now, that's already been determined by the SC). 7% by the way is
the standard range for a license agreement in the pharma industry. Siga does not get hit with a
lump sum obligation, and PIP gets some dough, lawyers make some more money, Parson's keeps
his dignity, and life goes on. Simple.
Hi Golong, I just saw this on the commentary section of the SeekingAlpha site from todays article, any thoughts ?
'Page 2 of the reargument opinion restates SIGA's (2) argument that the income stream was inconsistent with the legal requirement that damages be proven with reasonable certainty ( they were speculative).
Parsons discusses this in depth on pages 7 through 10 concluding that an income stream is not speculative since no payments would be made if there were no income.
Most important, the Supreme Court decision did not reverse this, which they would have if they opined that such a remedy was speculative. By sending the remedy back to Parsons they were not saying you can't do this, they were saying that he can now go back to the LATS allocation to formulate the remedy. In Parson's initial opinion he implied that he felt he could not rely on the LATS since there was no law allowing him to treat it as a contract. The Supreme Court decision clarified that he could.
As such, expect Parson's new decision to more closely follow the LATS which overwhelmingly favors PIP. '
Sentiment: Strong Buy
Yes....A real interesting situation the SC has gotten all the parties into...LOL!
It looks to me like a lump sum damage award for expectation damages is not feasible
because if there is no income, or profit, from the BARDA contract, PIP should not be unjustly
enriched by a Court speculating on what that income stream "should" amount to over time. Too many things can,and often do happen in the interim.
I do believe that Parson's is free to imply that had Siga negotiated with PIP in "good faith"
that the worst PIP would have come out with was a license agreement for ST-246. What the terms
of that license agreement would have been...what PIP had to contribute to earn it...how long it
would apply for...the license percentage rate....was it for both foreign and domestic sales or just
domestic, etc. is a question of fact.
Beaver...The issue and arguments being whether the LATs amounted to a contract, or that the term "non binding" had any material effect on such, is now a moot point. The SC basically said enough elements existed so that there was a contract between the parties. The issue now is purely damages for bad faith
in contract negotiations. It seems to me the issue now was the failure to agree to a license agreement in
favor of PIP after things fell apart between the parties. I think that is what Parsons is going to deal with
in the months ahead.
golongin, I agree with one caveat..I think you are mixing up terms? Isn't the original decision after $40 million net profits for SGA a 50% split of net profits? So when you say 7% of net sales, although that probably is less than 50% of net profits, you are comparing apples to oranges. Depends on margins, SG&A, etc
Homebuilder....Yes, the current ruling before it was recently reversed provided for a 50-50 split of net profits after the first 40 million went back to Siga. ST-246 has a very low mfg cost, so unless one played the accounting games of non cash items...deferred revenues....R&D...depreciaton....etc.
gross sales of ST-246 should show a net profit of closed to 70-80%. So even at say a 50% net profit rate, the BARDA contract Phase 1 should generate close to 225 mil in net profits to Siga. Siga gets back the first 40 million leaving approx. 185 mil to be divided 50-50 between Siga and PIP pursuant to the previous ruling. That would have given PIP close to 92 million in profits.
If we take a net sales figure of say 450 million over the life of the BARDA Phase 1 contract,
and give Siga back the first 40 million of that under a net profits definiton, there will be 370 million in future net sales that could be subject to a 7% license fee. Such comes out over time to around 25.9 million over time, which seems to be a figure that most here feel would be equitable given the SC's ruling. Now discount that for present value in a settlement today, it would be closer to 20 million. Again, a figure everyone could live with to get this over with for good.
I do admit PIP are limited to 0-7%.SIGA will effectively defend that the LATS does not contain finalized terms because it was never consummated at the time of the breach. I think reliance damage, because PIP's best models were basis I and basis II, any they were not that great.