MEMORIAL DRIVE CONSULTANTS, INC. v. ONY, INC. (W.D.N.Y. 2001)

Plaintiff Memorial Drive Consultants, Inc. ("MDCI") filed suit against defendant Ony, Inc. ("ONY") alleging that ONY had breached its agreement to pay plaintiff (1) a five-percent commission on funding that plaintiff obtained from third parties to finance ONY's development and marketing of a new drug, Infasurf, and (2) a separate and additional five-percent commission on any revenues ultimately generated from the sale of Infasurf. The pertinent facts are set forth in this Court's May 27, 1999 Memorandum and Order and familiarity therewith is assumed. Trial was held in this matter from June 20, 2000 until June 29, 2000 and resulted in a jury verdict for defendant. On June 30, the Clerk of the Court entered final judgment stating that, pursuant to the jury verdict, "IT IS ORDERED AND ADJUDGED that no cause of action has been found against defendant." Plaintiff moved July 17, 2000 for three reliefs — viz., (1) vacatur of the final judgment pursuant to Rule 60(a) of the Federal Rules of Civil Procedure ("FRCvP"), (2) judgment in its favor and notwithstanding the verdict pursuant to FRCvP 50(b) or, alternatively, a new trial pursuant to FRCvP 59 and (3) entry of final judgment pursuant to FRCvP 58 encompassing the above relief. Presently before this Court is plaintiff's said motion.

Plaintiff seeks to vacate the Clerk's entry of final judgment pursuant to FRCvP 60(a) on the basis that a clerical mistake had been made resulting in the entry of an erroneous final judgment. The final judgment entered by the Clerk of the Court June 30, 2000 stated that, pursuant to the jury verdict, "IT IS ORDERED AND ADJUDGED that no cause of action has been found against defendant." The jury had found that defendant was not liable to plaintiff for post-commercialization benefits under quantum meruit June 29, 2000; however, this Court had already held in its May 27, 1999 Order that, "as a matter of law, MDCI is entitled to its 5% commission on the loans and moneys paid by Forest Laboratories, Inc. ("Forest") to third parties, as well as on the cash infusions ONY chose to characterize as RD funding." Accordingly, the Clerk made a clerical error in entering judgment, because the judgment entered reflected only the jury verdict on quantum meruit post-commercialization benefits and failed to include the earlier ruling by this Court on pre-commercialization benefits. Therefore plaintiffs request to vacate the entry of final judgment will be granted.

At the time this Court signed the May 27, 1999 Order, the amount of pre-commercialization expenditures before it was $18,100,165; however such figure only covered pre-commercialization expenditures up until January 1998. Plaintiff moved for an order under FRCvP 54(b) September 7, 1999 seeking a pre-trial entry of judgment on its pre-commercialization claim in the amount of $30,423,344.

This Court denied that motion in an order dated June 6, 2000 on the ground that the amount of pre-commercialization benefits upon which plaintiff claimed a commission was substantially higher than had been submitted when this Court issued its May 27, 1999 Order and that, consequently, the damages related to the pre-commercialization benefits would be determined at trial. Subsequently the parties entered into a stipulation dated June 16, 2000 that the "total expenditures by Forest Laboratories, Inc. during the pre-commercialization period of Infasurf were $30,423,344.00." Based upon the May 27, 1999 Order in which this Court held that plaintiff was entitled to a five percent commission on "the loans and moneys paid by Forest to third parties, as well as on the cash infusions ONY chose to characterize as RD funding," the above stipulation and the evidence adduced at trial, the undersigned duly found that the total amount of pre-commercialization expenditures upon which plaintiff was entitled to a five-percent commission to be $30,423,344.00 and accordingly instructed the jury that plaintiff was being awarded approximately one and a half million dollars — i.e., five percent of the above amount.

Five percent of $30,423,344.00 equates to $1,521,167.20. Defendant has already paid plaintiff a total of $221,362.55 towards its pre-commercialization commission. Therefore defendant owes plaintiff a total of $1,299,804.70. To this amount interest must be added. Plaintiff argues that interest should be based upon the Massachusetts interest rate of twelve percent. Defendant argues that interest should be based upon the New York interest rate of nine percent. The contract between the parties stated that "[a]ny change in this agreement shall be confirmed in writing and will be governed under the law of the Commonwealth of Massachusetts." Compl. Ex. A (Contract at 4). In its May 27, 1999 Order, this Court did not determine the choice of law issue as such was not necessary thereto; however this Court now finds this provision to be applicable only to changes in the contract, not to the calculation of interest. A federal court adjudicating a case pursuant to diversity jurisdiction must apply the choice-of-law rules of the state in which it sits. Brink's Unlimited v. South African Airways, 93 F.3d 1022, 1030-1031 (2d Cir. 1996), cert. denied, 519 U.S. 1116 (1997). New York utilizes the "center of gravity" or "grouping of contacts" test in determining which state's law to apply in a contract case. Ibid. The factors utilized under the above tests include "the places of negotiation and performance, the location of the subject matter, and the domicile or place of business of the contracting parties" with the most weight going to the places of contracting and performance. Id. at 1031. MDCI is located in Massachusetts whereas both ONY and Forest are located in New York. Am. Compl. ¶¶ 1-2, 4. The contract was in essence by a Massachusetts company creating a relationship between one New York company to provide another New York company with funding to develop a new drug in New York. Based upon the above factors, this Court finds New York to be the center of gravity of the contract between the parties. Under New York law, interest "shall be recovered upon a sum awarded because of a breach of performance of a contract * * *." N.Y. C.P.L.R. 5001(a). When the "damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date." N.Y. C.P.L.R. 5001(b). Interest "shall be at the rate of nine per centum per annum" — N.Y. C.P.L.R. § 5004 — and such is not compounded. Long Playing Sessions, Inc. v. Deluxe Laboratories, Inc. et al., 129 A.D.2d 539, 540 (App.Div. 1st Dep't 1987). The contract provision relating to pre-commercialization compensation stated that

"Ony agrees to pay MDCI an amount equivalent to five (5) percent of all RD funding made whenever they are made and all other contract licensing or other fees or payments of any kind paid to Ony by the MDCI-identified corporate partner or equity investor within 30 days of receipt of each payment for such investment by Ony." Compl. Ex. A (Contract at 3).

Inasmuch as the payments for which plaintiff is entitled to a commission on arose at various times, this Court shall award interest from a reasonable intermediate date. Defendant received pre-commercialization funding from June 1991 until March 1999. While the parties have not provided this Court with the precise dates when such payments were made, it can be deduced — through the May 27, 1999 Order and the parties' June 16, 2000 stipulation — that $18,100,165 had been received from June 1991 through January 1998 and the remainder from January 1998 until March 1999. Based on this information, the Court will utilize March 1996 as the date from which to compute interest and accordingly award plaintiff four years of interest at the rate of nine percent per year. According plaintiff will be awarded $1,767,734.38 constituting a commission in the amount of $1,299,804.70 combined with $467,929.68 in pre-judgment interest.

Plaintiff also seeks judgment notwithstanding the verdict pursuant to FRCvP 50(b) or, in the alternative, a new trial pursuant to FRCvP 59. A motion for judgment notwithstanding the verdict must be filed "no later than ten days after entry of judgment" — FRCvP 50(b) — and a "motion for a new trial shall be filed no later than ten days after entry of the judgment." FRCvP 59(b). Final judgment was entered June 30, 2000 and plaintiff did not file its motion until July 17, 2000; however, because the allocated time period is under eleven days, Saturdays, Sundays and legal holidays are not included in calculating the time frame — FRCvP 6(a) — and, resultantly, plaintiff's July 17, 2000 motion was timely filed.

Plaintiff has made resolution of its post-trial motion for judgment notwithstanding the verdict or, alternatively, for a new trial particularly difficult for this Court. Plaintiff raised several grounds for relief in its post-trial motion; however it discusses them all under the auspices of a motion for judgment notwithstanding the verdict and simply requests a new trial in the alternative. The bases for seeking judgment notwithstanding the verdict differ from those for seeking a new trial as do the relevant standards for relief. Accordingly this Court has been forced to sort out and redirect the various grounds raised by plaintiff into the proper motion to ensure that each is addressed under the proper standard. The sole ground that plaintiff properly brings pursuant to a motion for judgment notwithstanding the verdict is that there was not legally sufficient evidence to support the jury's verdict. The three remaining issues — viz., (1) that the jury's verdict is against the weight of the evidence, (2) that it was error to limit the testimony of the plaintiff's principal and expert witness and (3) that the jury charge and jury question were erroneous are proper grounds for a new trial and not for a judgment notwithstanding the verdict. Furthermore, plaintiff has not provided this Court with citations to the trial transcript showing where it made objections on the record on the above issues and on what specific basis as is required to preserve them for review; further, it does not appear that plaintiff has even ordered the trial transcript. However, because this Court will be denying both the motion for judgment as a matter of law and for a new trial, this Court will assume — for purposes of this motion only — that plaintiff properly moved for a directed verdict on the grounds it now raises and that objections were properly made for the record upon the grounds plaintiff relies in its post-trial motion.

Plaintiff appears to be under the mistaken impression that this Court found defendant to be liable to plaintiff for post-commercialization commissions and that the trial was only to determine quantum meruit the amount of such. Mem. of Law in Supp. of Pl.'s Post-trial Mot. at 1-4. Plaintiff even characterizes the issue to have been determined by the jury as "to how much of a fee was MDCI entitled when Infasurf was commercialized." Reply Mem. of Law in Further Supp. of Pl.'s Post-trial Mot. at 1-2. This contention is specious. In its May 27, 1999 Order, this Court held that plaintiff's claim for post-commercialization benefits under the contract was unenforceable, but that, "[u]nder the circumstances of this case, it is conceivable that, if and when Infasurf is brought to market, MDCI will be able to show that ONY is being unjustly enriched. Therefore, while this Court presently expresses no opinion on the merits of MDCI's quantum meruit claim, such will not be dismissed as a matter of law at this time." Based upon this Court's May 27, 1999 Order, the issue to be determined by the jury was whether plaintiff was entitled to recover under quantum meruit and, if so, the amount of such recovery. The issue of liability was therefore properly before the jury pursuant to this Court's May 27, 1999 Order. Indeed, even the proposed verdict sheet submitted by plaintiff put the issue of liability before the jury.

Accordingly, plaintiff's contention that this Court had already decided that plaintiff was entitled to a post-commercialization commission as a matter of law and that the only query posited to the jury was the amount of such measured under quantum meruit is completely lacking in merit and deserves no further consideration.

Plaintiff seeks judgment notwithstanding the verdict on the basis that there was no legally sufficient evidence to support the jury's verdict. Only the specific grounds raised at trial in a motion for a directed verdict may be relied upon in a motion for judgment notwithstanding the verdict. Metromedia Company v. Fugazy, 983 F.2d 350, 362 (2d Cir. 1992), cert. denied, 508 U.S. 952 (1993). The only exception to this requirement is the prevention of manifest injustice. Ibid. The reason that the grounds for a motion for a directed verdict must be made with specificity is to notify the opposing party of deficiencies in its proof so that it may rectify such before the case is submitted to the jury. Holmes v. United States, 85 F.3d 956, 962 (2d Cir. 1996). In ruling on a motion for judgment notwithstanding the verdict, the court "must view the evidence in the light most favorable to the nonmovant and grant that party every reasonable inference that the jury might have drawn in its favor." Purgess v. Sharrock, 33 F.3d 134, 140 (2d Cir. 1994). Furthermore, the court must refrain from weighing the evidence or the credibility of the witnesses. Merrill Lynch Interfunding, Inc. v. Argenti, 155 F.3d 113, 120 (2d Cir. 1998). A court "may grant a judgment as a matter of law pursuant to this rule only if no reasonable jury could find for the non-moving party." Stagl v. Delta Air Lines, 117 F.3d 76, 79 (2d Cir. 1997). A court will "upset the jury's verdict only if there is such a complete absence of evidence supporting the verdict that the jury's findings could only have been the result of sheer surmise and conjecture." Weissman v. Dawn Joy Fashions, Inc., 214 F.3d 224, 233 (2d Cir. 2000). Judgment notwithstanding the verdict "is reserved for those rare occasions when there is such a complete absence of evidence supporting the verdict that the jury's finding could only have been the result of sheer surmise and conjecture or the evidence must be so overwhelming that reasonable and fair-minded persons could only have reached the opposite result." George Basch C., Inc. v. Blue Coral, Inc., 968 F.2d 1532, 1536 (2d Cir.), cert. denied, 506 U.S. 991 (1992).

Having heard the evidence firsthand, the undersigned is satisfied that, based upon the evidence before it, a reasonable jury could properly conclude that plaintiff was not entitled to additional compensation under quantum meruit for the post-commercialization period of Infasurf. It was perfectly rational for the jury to decide that the value of plaintiff's services to defendant was less than or equal to $1.5 million and accordingly determine that there was no unjust enrichment because this Court had awarded plaintiff compensation under the contract in that approximate amount. Although the terms of the contract would have entitled plaintiff to a five-percent commission for the pre-commercialization funding received by defendant and an additional five-percent commission on the post-commercialization revenues generated by Infasurf, this Court had earlier found this provision unenforceable and the jury was justified in finding that plaintiff was not entitled to additional compensation under quantum meruit beyond what this Court had earlier awarded.

In the alternative to judgment notwithstanding the verdict, plaintiff seeks a new trial on the ground that the jury's verdict was against the weight of the evidence. "Unlike a motion for judgment notwithstanding the verdict, a new trial motion may be granted even if there is substantial evidence to support the verdict. The trial judge is free to weigh the evidence himself and need not view it in the light most favorable to the verdict winner." Benevino v. Saydjari, 574 F.2d 676, 683-684 (2d Cir. 1978). When considering a motion for a new trial

"[t]he trial judge exercising a mature judicial discretion, should view the verdict in the overall setting of the trial; consider the character of the evidence and the complexity or simplicity of the legal principles which the jury was bound to apply to the facts; and abstain from interfering with the verdict unless it is quite clear that the jury has reached a seriously erroneous result. The judge's duty is essentially to see that there is no miscarriage of justice. If convinced that there has been then it is his duty to set the verdict aside; otherwise not." Id. at 684.

A judge is not required to grant a new trial simply because he would have come to a different verdict than did the jury. Id. at 685. The granting of a new trial on the basis that the verdict was against the weight of the evidence is within the sound discretion of the trial judge; however, when "the resolution of the issues depended on assessment of the credibility of the witnesses, it is proper for the court to refrain from setting aside the verdict and granting a new trial." Metromedia, at 363. Having heard the evidence presented at trial, this Court is satisfied that the jury's verdict — that plaintiff was not entitled to additional compensation under quantum meruit upon the commercialization of Infasurf because plaintiff had already been adequately compensated for its services by this Court's award of a five-percent commission on the pre-commercialization funding received by defendant — was not against the weight of the evidence and accordingly a new trial will not be granted on such ground.

Plaintiff also seeks a new trial on the ground that this Court improperly "precluded MDCI's expert from testifying as to any matters relating to the parties' contract and the value of the services as they related to such contract" and "erroneously sustained defendant's objections to testimony from plaintiff's principals regarding the value of their services and the amount owed MDCI by Ony." Zuffranieri July 17, 2000 Aff. ¶¶ 17, 19. A trial court has considerable discretion in determining whether to admit or exclude evidence — Barrett v. Orange County Human Rights Comm'n, 194 F.3d 341, 346 (2d Cir. 1999) —; accordingly, a motion for a new trial on the basis of improper evidentiary rulings will be granted only where the improper admission or exclusion of evidence affects a substantial right of the moving party. Malek v. Federal Insurance Company, 994 F.2d 49, 55 (2d Cir. 1993).

Pursuant to Rule 103 of the Federal Rules of Evidence, the party seeking a new trial must have made a timely objection or offer of proof to preserve the evidentiary issue for review. The court must assess the likelihood that the improper evidentiary ruling affected the jury's verdict and grant a new trial unless fairly assured that the error did not affect the outcome of the case in light of the facts and evidence elicited in the case as a whole. Ibid. This Court did not issue a written order limiting the testimony of plaintiff's expert witness and plaintiff has failed to submit the trial transcript establishing the specific basis upon which this Court limited such and showing that it made an offer of proof to preserve the issue. Assuming that an offer of proof was made and the only limitation imposed upon the expert witness's testimony was the preclusion of testimony relating to the parties' contract and the value of those services as measured under that contract, the undersigned finds such limitation to have been proper. This Court had already ruled that the contract provision relating to the payment of a five-percent post-commercialization commission was invalid and that testimony regarding such would only serve to confuse the jury and possibly result in the jury simply awarding damages under the invalid contract provision. In regard to objections to the testimony of plaintiff's principals, plaintiff has not offered anything in support of its bare contention and, accordingly, this Court finds such ground to be meritless.

Finally, plaintiff seeks a new trial on the basis that this Court committed errors in its jury charge and in the wording of the jury verdict questions. Plaintiff states that the court erred in instructing the jury that the court was awarding plaintiff approximately $1.5 million in pre-commercialization commissions because such information served to confuse the jury and because the court overstated the amount by failing to deduct the $221,362.55 that defendant had already paid plaintiff from such amount. Zuffranieri July 17, 2000 Aff. ¶ 15. Plaintiff also states that the verdict sheet utilized by this Court contained an improper question because it failed to appropriately set forth the elements of proof for quantum meruit liability and misled the jury by suggesting that the Court had already awarded plaintiff post-commercialization damages or "benefits." Zuffranieri July 17, 2000 Aff. ¶ 13-14. A motion for a new trial on the basis that the jury instructions were erroneous will be granted only if, "taken as a whole, the jury instructions gave a misleading impression or inadequate understanding of the law." Plagianos v. American Airlines, Inc., 912 F.2d 57, 59 (2d Cir 1990). "[FRCvP] 51 provides that `[n]o party may assign as error the giving or the failure to give an instruction unless that party objects thereto before the jury retires to consider its verdict, stating distinctly the matter objected to and the grounds of the objection.' This rule is designed to allow a trial court to have an adequate opportunity to cure any defects in the instructions before sending the jury to deliberate." Caruso v. Forslund, 47 F.3d 27, 30-31 (2d Cir. 1995). A party may not rely on its submission of proposed jury instructions but must make a proper objection. Id. at 31 (citing Salazer v. City of Chicago, 940 F.2d 233, 242 (7th Cir. 1991)); Samara Brothers v. Wal-mart Stores, Inc., 165 F.3d 120, 130 (2d Cir. 1998), rev'd on other grounds by 529 U.S. 205 (2000). "A jury charge is erroneous if it misleads the jury as to the correct legal standard, or if it does not adequately inform the jury of the law." Hathaway v. Coughlin, 99 F.3d 550, 552-553 (2d Cir. 1996). The jury charge must be viewed as a whole to determine if it is "correct and sufficiently covers the case so that a jury can intelligently determine the questions presented to it." Id. at 553. "A jury verdict will be reversed only when an appellant can show that the instructions considered as a whole prejudiced him." Holzapfel v. Town of Newburgh, 145 F.3d 516, 521 (2d Cir. 1998). The formulation of special verdict questions rests in the sound discretion of the trial judge, and a jury verdict based upon such should be overturned only if it is found that they "mislead or confuse the jury, or if they inaccurately frame the issues to be resolved by the jury" when viewed in conjunction with the jury instructions. Vichare v. AMBAC, Inc., 106 F.3d 457, 465 (2d Cir. 1996). However, under FRCvP 49(a), "a party who failed to object, before the jury retired, to the substance of special verdict questions to be put to the jury has no right to object to such matters on appeal." Metromedia, at 363. "A party who fails to object to jury instructions or to the substance of special verdict questions to be put to the jury has no right to object to those matters on appeal." Simms v. Village of Albion, N Y, 115 F.3d 1098, 1109 (2d Cir. 1997). The only exceptions to this requirement are for "plain error that may result in a miscarriage of justice, or in obvious instances of misapplied law." Ibid.

This Court finds that instructing the jury that it had awarded the plaintiff approximately $1.5 million as a pre-commercialization commission was proper. The jury was specifically instructed that this award did not cover the post-commercialization period and the jury needed to know that this Court had awarded such amount because it was deciding liability under quantum meruit. Accordingly, if the jury found the reasonable value of plaintiff's services to have been less than or equal to $1.5 million, there would be no liability because defendant would not have been unjustly enriched inasmuch as this Court had already found it liable for such amount under the contract.

Plaintiff states that the jury question improperly stated that plaintiff had already been awarded a post-commercialization benefit. The question stated "Has plaintiff Memorial Drive Consultants, Inc. proven by a preponderance of the evidence that it conferred a post-commercialization benefit upon defendant ONY, Inc. beyond that which this Court has already found such plaintiff entitled to receive for its pre-commercialization work on behalf of such defendant?" Plaintiff reads this question as asking "Has plaintiff Memorial Drive Consultants, Inc. proven by a preponderance of the evidence that it conferred a post-commercialization benefit upon defendant ONY, Inc. beyond that post-commercialization benefit which this Court has already found such plaintiff entitled to receive for its pre-commercialization work on behalf of such defendant?" and states that it was inconsistent with the jury instructions because it "blurred the distinction between the post-commercialization benefit conferred upon Ony (which was realized when Ony began to market Infasurf) and the amount of the pre-commercialization compensation to which MDCI was entitled. In other words, under the wording of the verdict sheet, if the jury thought that MDCI was entitled to less than $1.5 million (the amount of the pre-commercialization compensation), then the jury would be required to render a verdict that MDCI did not confer a benefit." Mem. of Law in Supp. of Pl.'s Post-trial Mot. at 5.

In its Reply Memorandum of Law in Further Support of Plaintiff's Post-trial Motion, plaintiff states that it objected to the Verdict Sheet utilized by this Court at trial and states that it "respectfully submits that its challenge to the jury verdict sheet is fully preserved on the record, as should be borne out by the [unsupplied] transcript." Id. at 2-3. Plaintiff has submitted an affidavit from one of its attorneys, Philip Y. Brown, Esq., who states that

"[a]t trial I recall trial counsel objecting for the record to the wording of the special questions that the Court used on the verdict sheet. I also recall that we, as trial counsel on plaintiff's behalf, submitted special questions to the Court for its review. The Court overruled our objection and determined not to use our special questions. I also recall submitting for the Court's review, changes to the wording of Question 1 on the [Court's] verdict sheet. Specifically, I recall submitting a written change to the wording to clarify that, to date, plaintiff has not received any money pursuant to the Court's summary judgment Order. We requested this clarification so that the jury would not offset any award on the post-commercialization part of the contract with money awarded on the pre-commercialization part of the contract. The Court overruled our requests and declined to revise the Verdict Sheet." Brown August 8, 2000 Aff. ¶¶ 3-4.

As indicated in said affidavit, plaintiff does not specifically state that it objected to the jury question because it gave the jury the impression that this Court had already awarded plaintiff post-commercialization damages. Plaintiff has procedurally defaulted on this argument and, as recognized by the Second Circuit Court of Appeals, "in the absence of an objection to the questions submitted to the jury or to the court's instructions, [plaintiff has] the burden of proving plain error which would involve a miscarriage of justice." Simms, at 1109.

Accordingly it is hereby ORDERED that plaintiff's motion for judgment notwithstanding the verdict or for a new trial is denied, that the June 30, 2000 judgment is vacated, that plaintiff is awarded $1,767,734.38 pursuant to this Court's May 27, 1999 order, that the Clerk of this Court is directed to enter an amended judgment reflecting both the jury verdict and the decision of this Court and that this case shall be closed in this Court.