1) I'm insulted! I believe development-stage companies must never be allowed to walk away from signed contracts... any that do should obviously be made to pay reliance damages. 2) Nope. Not even PIP is attempting to claim definite, certain, and reasonable data for the ascertainment of expected profits existed in 2006 as you are... because that would be dumb. PIP's whole argument is that once damages are established, the amount of the damages can be speculative... which is equally as dumb. 3) You stopped using numbers and after about your fourth sentence you jump on the crazy train and never look back so I will concede your point that I may have to put drop on ignore. I'm curious about your last discussion on insider buys and sells though and why you even bring it up and how you think it's relevant? Are you seriously suggesting the insiders making those trades have a line on how the SC is going to land on this? If they did, don't you think we would see a lot more insider buying and selling? Why bring it up? It is obviously irrelevant.
Ok, seriously, I'm out. You can have the last word.
Tee, you are deluding yourself 1) the BUSINESS must be long established with uniform profits, not the business sector. SIGA circa 2006 uniformly produced zero profits. 2) definite, certain, and reasonable data for the ascertainment of expected profits did not exist in 2006 and does not exist now. 3) Sigh, no. 4) You ignored the "limited, reasonable future time" requirement. How many years post breach is a "limited, reasonable future time". Let me help, in most cases, it is a year or less, not several years.
But keep trucking brother. I'm out until the Supremes weigh in, I just couldn't help responding to you post because you are in fantasy land.
"Generally, in order to prove damages resulting from lost future profits (which are not too speculative for recovery), it is necessary to either have a liquidated damages clause within the contract being enforced, discussed hereinafter, or it is necessary to prove that there is a business which has been long established, has uniformly made profits, there is definite, certain, and reasonable data for the ascertainment of such anticipated profits, and such profits were reasonably within the contemplation of the parties at the time of the contract. In such circumstances, anticipated profits may be recovered, at least for a limited, reasonable future time, even though they cannot be computed with exact mathematical certainty."
The opening brief, answering brief, and both reply briefs (along with the final decision) are posted on the Delaware Supreme Court website, along with a video of the oral arguments. The arguments for why expectation damages are clearly laid out by both sides so there really aren't going to be any surprises in this appeal, and the facts weigh heavily in favor of SIGA. It is obviously impossible to say without speculation what the value of ST246 was in 2006, and I'd go as far as to say that that fact is uncontested even by Parsons, who argues that his remedy does rely on gross and utter speculation as to the dollar amount of the award, but that once the fact of damages are established, speculation as to the amount of the damages is ok.... which is absurd. He correctly found in his original ruling that PIPs expert testimony and formula were utterly speculative and now he has pathetically resorted to reversing his own decisions because the DSC has put him in a box.
Specific timeline: the DSC will hear the appea en banc in August. The final decision in favor of SIGA (reliance damages) will be released in November. Why? The general rule, followed in Delaware law and elsewhere, is that future lost profits must be established by “substantial evidence” and not by speculation. Mobile Diagnostics, Inc. v. Lindell Radiology, P.A., 1985 WL 189018, at *4 (Del. Super. July 29, 1985) (“The general rule is that loss of future profits must be established by substantial evidence and can’t be left to speculation.”); Re v. Gannett Co., Inc., 480 A.2d 662, 668 (Del. Super. 1984) (“Courts have required that loss of future profits be established by substantial evidence and not be left to speculation.”(citing 25A C.J.S. Damages §§ 162(2), 162(4); 22 AM. JUR. 2D Damages § 172, at 242-45)).
Many seem to think that PIP got some sort of victory out off the first DSC decision. I'm guessing they haven't read the briefs and counter briefs that can be found by searching "Delaware supreme video" and scrolling to the very bottom...
Unchanged. I'm glad the stock has run lately but I'm not sure it means very much. SIGA is likely to be delisted shortly and the stock will take a hit. Then the Delaware Supreme Court will agree to hear the appeal and the stock will bounce back. Then in a few months the DSC will make their call. If it's in favor of PIP, both sides will come to a quick settlement where the payments are made over some longer time period because PIP doesn't want to continue this in bankruptcy court. PIP's decision to fire most of their employees supports telegraphs this IMO. If the DSC decision is in favor of SIGA, I make a lot of money. Either way, SIGA emerges from bankruptcy rapidly after the DSC decision. Long term, either way, PIP is out of the picture and SIGA gets FDA approval and a follow on contract (thank you Russian Government with smallpox in crisis) sometime around 2017 and I make a lot of money.
Sentiment: Strong Buy
So here are my predictions on a timeline as this all moves forward. I expect oral arguments before the DSC en banc to take place in June/July with a decision by the end of October, August at the earliest. Siga will continue to execute on the contract and rake in cash from the government during that time so, by the time damages are finalized, a bankruptcy that wipes out common shareholders and hands control of the drug to PIP simply will not be in the cards, even if the award stands as is... which is extremely unlikely. Siga stock will probably be delisted within the next few months, perhaps around May. I think this will be an excellent chance to pick up OTC shares on the cheap. In the end, Siga is likely to win on appeal as the damages award in its current state is just really poorly justified as Siga pointed out in their press release announcing their appeal. I don't expect a large follow on contract from BARDA until FDA approval is granted which will probably be in 2017 or 2018. I do expect a large follow on contract post FDA approval. I also think CMX-001 will be purchased by the government as the second antiviral for the stockpile, but in much smaller quantities. Despite any rumors to the contrary, Siga's product is vastly and overwhelmingly superior against smallpox and the government will be buying lots more of it for the foreseeable future. My only real fear is M&F attempting to take the stock private while it's down. See you all again in August/September!
Siga does have over $300 million available, $110 million in cash and over $200 million in more cash classified as deferred revenue, to pay any damages, capped at $194 million, that make it through the Del Supreme Court. Siga's appeal should be sorted out in three or four months. As jimdavist implies, the market just doesn't have much faith this latest award will survive the SC in its current form. Meanwhile, MacAndrew and Forbes is snatching up Siga shares on the open market and PIP insiders are selling. I look forward to the SC decision, I doubt they'll give Parsons a third chance.
From a September 2014 article on a Delaware Chancery decision:
"In lengthy disputes where a judgment is entered as of a date several years in the past, prejudgment interest may constitute a more than trivial amount. In Levey v. Brownstone Asset Management, Consolidated C.A. No. 5714-VCL, the plaintiff, who prevailed at trial, sought to recover interest on the judgment amount at the constant rate of 10.25 percent from Jan. 26, 2006, forward. The defendants took the position that the interest rate should float, i.e., change whenever the Federal Reserve discount rate changed. The court agreed with the defendants and found that an award of a fluctuating rate of interest serves the dual purposes of compensating the judgment creditor for the loss of use of its capital during the pendency of the action and causes the disgorgement of the benefit the judgment debtor has enjoyed during the same period of time.
Read more: http://www.delbizcourt.com/id=1202669527501/Chancery-Court-Confirms-Fluctuating-Interest-Rate-Is-Appropriate#ixzz3OAXd7PFf"
Chancery Court Confirms Fluctuating Interest Rate Is Appropriate
byThomas E. Hanson Jr., Delaware Business Court Insider
September 10, 2014 | 0 Comments
In lengthy disputes where a judgment is entered as of a date several years in the past, prejudgment interest may constitute a more than trivial amount. In Levey v. Brownstone Asset Management, Consolidated C.A. No. 5714-VCL, the plaintiff, who prevailed at trial, sought to recover interest on the judgment amount at the constant rate of 10.25 percent from Jan. 26, 2006, forward. The defendants took the position that the interest rate should float, i.e., change whenever the Federal Reserve discount rate changed. The court agreed with the defendants and found that an award of a fluctuating rate of interest serves the dual purposes of compensating the judgment creditor for the loss of use of its capital during the pendency of the action and causes the disgorgement of the benefit the judgment debtor has enjoyed during the same period of time.
In Levey, the court awarded the plaintiff damages, plus pre- and post-judgment interest at the legal rate, compounded quarterly, from Jan. 26, 2006, forward. The parties, however, could not agree on how the legal rate of interest should be applied. The plaintiff maintained that the interest rate as of Jan. 26, 2006, was 10.25 percent and that such rate should be used to calculate both pre- and post-judgment interest until the date of payment. The defendants countered that the rate of interest should fluctuate based on changes in the Federal Reserve discount rate. The court analyzed the parties' respective positions by applying the purposes underlying an award of interest.
Initially, the court found that it "has broad discretion, subject to principles of fairness, in fixing the [interest] rate to be applied," citing Valeant Pharmaceuticals International v. Jerney, 921 A.2d 732, 756 (Del. Ch. 2007),
Sentiment: Strong Buy
So I've been doing more research and it turns out the claim Parsons made in his latest ruling that, and I'm paraphrasing, "once proof of damages is established, the amount of damages requires no certainty at all", turns out to be completely wrong by firm precedent in Delaware. See Total Care Physicians, P.A. v. O'Hara, No. Civ. A. 99C-11-201JRS, 2003 Del. Super. LEXIS 261, at *11 n. 19 (Del. Super. Ct. July 10, 2003) (quoting 22 AM. JUR. 2D Damages § 488 (1988)).
In Delaware, it turns out that when the fact of damage has been proven, the legal standard is that the evidence must be such as will “lay a foundation which will enable the trier of facts to make a fair and reasonable estimate of the amount of damage."
I found what I was looking for. I won't be posting anything more now until after the Delaware Supreme Court reverses Parsons so you won't be seeing any of my posts for a long time. Have a Merry Christmas all!
Of course, this article failed to mention the fourth method: The Parsons' makes $#!^ up method where the underlying data is all completely made up by the court and justified on the thinnest of grounds, and then wrung through a ridiculously sensitive model (turning the stomachs of responsible mathematical modelers everywhere) to produce a damages number composed of nothing but fairy dust and dreams.
No chance Parsons' latest effort at a damages award makes it through the SC without being thrown out completely or, worst case, reduced by an order of magnitude somewhere around 10.
"An example of this method is found in America’s Favorite Chicken Co. v. Samaras. Samaras brought a breach of contract claim alleging that the defendant failed to comply with its agreement to provide two build-to-suit restaurants. Although the restaurants were never built, Samaras was able to establish $1.5 million in lost profits based on the historical financial operations of the company’s existing franchises.
The lost market share model assumes that the plaintiff would have maintained the same share of the market during the damage period. It requires detailed analyses of the company, its market, competition, and other economic factors. A related method uses proof of specific business that was lost, such as specific contracts that were terminated.
More often than not, the three methods are combined to provide support for the lost profits claim. But regardless of how you get to the big numbers, they need a lot of support. To recover damages for lost profits, the estimate must be based on objective facts, figures, or data from which the amount of lost profits can be ascertained to a reasonable certainty."
Sentiment: Strong Buy
"The courts have sanctioned three methods for calculating lost profits: (1) before and after; (2) the yardstick; and (3) lost market share model.
The “before and after” method is an accepted approach for showing the lost profits of an established enterprise. It calculates lost earnings by comparing profit history before and after a damaging event. You must present detailed information to support the assumed revenue, expense, and growth rates.
At a minimum, you and your expert must analyze past profit-and-loss statements, cash flow reports, income tax returns, and business plans. You also should conduct interviews with key members of the management team, an analysis of the competition, an analysis of supply chain issues, if any, and other matters that could materially impact the forecasted profits during the damage period. To determine a projected growth rate and projected net profit margin of the plaintiff, you should review data on historical operations and cost structures; customers or clients and potential market areas; sales and profitability before and after an event; existing contracts or orders; industry segment analysis of typical or average growth rates; market constraints; the company’s organizational structure, marketing plans, and infrastructure; management experience with like enterprises or products; competitors comparable to the plaintiff; the impact of technology; the impact of changes to the economy; and past profitability.
The yardstick method is a comparative approach, relying on evidence of the performance of comparable companies in comparable industries to project what the plaintiff would have earned had it followed trends in the specific industry or market. It may be used when the company does not have a history of profitability, or when a plaintiff is driven out of business prior to establishing a sufficient earnings history."
And so I am clear, a settlement is extremely unlikely to occur until after the completion of this latest appeal to the Delaware Supreme Court. PIP isn't going to be getting paid anytime soon an even if they do, it's not going to be nearly what they want.
The Ch 11 filing, only serves to ensure an appeal happens. It is the right play and protects Siga's value in this situation. Siga has no real debt so they will continue as a going concern, maintain control of the drug, and get their appeal to the SC, and us shareholders will still get paid upon settlement, follow on contract, and/or an appeal win. Sure, the stock will get hit short term (again)--Siga management is playing the long game and bankruptcy filing here does not mean Siga shareholders are going to get wiped out.
Did certain Pharmathene shareholders really think Siga was going to be denied an appeal? Did certain Pharmathene shareholders really think Pharmathene was going to gain control of Siga's drug? Not gonna happen.