Bemcy, LLP v. Gilead Scis.

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BEMCY, LLP, Plaintiff, v. GILEAD SCIENCES, INC., Defendant.

Civil Action No. 21-3734

United States District Court, E.D. Pennsylvania

August 24, 2022

MEMORANDUM OPINION

WENDY BEETLESTONE, J.

This case primarily concerns whether Defendant Gilead Sciences Inc. (“Gilead”) should pay Plaintiff BEMCY LLP (“Bemcy”) $2 million as the primary sponsor of an eight-episode educational documentary series to be produced by Bemcy (hereinafter the “Program”). A contract signed by the parties concerning the Program contained the $2 million Sponsorship Fee but the series was never produced. Eventually, Gilead terminated the contract but not before Bemcy contends, it had breached by not paying the Sponsorship Fee in a timely manner. The parties have cross-moved for summary judgment pursuant to Federal Rule of Civil Procedure 56 on the one remaining claim for breach of contract. Gilead also contends that if it does not succeed on summary judgment with respect to its breach, it is entitled to summary judgment on the issues of damages: specifically, it argues Bemcy's damages should be limited to its undisputed costs and expenses.

For the reasons set forth below, summary judgment shall be granted in favor of Bemcy with respect to the breach and the $2 Million Sponsorship Fee. The question of whether in addition to the Sponsorship Fee Bemcy is entitled to lost profits, costs and expenses is reserved for trial.

I. BACKGROUND

On April 8, 2021 the parties reached an agreement (the “Agreement”) whereby Bemcy agreed to produce the Program and Gilead agreed to be the primary sponsor. Gilead retained Initiative Media, LLC (“Initiative”) to sign on its behalf and to remit the Sponsorship Fee to Bemcy on Gilead's behalf.

Section 2 and Schedule B of the Agreement spell out the parties' obligations with respect to payment. First, upon execution of the Agreement, Bemcy was to invoice Initiative for the $2 million Sponsorship Fee. Next, within 60 days of receiving the invoice Initiative (on behalf of Gilead) was to pay Bemcy, “via wire transfer according to instructions provided to [Initiative] by [Bemcy].”

Bemcy invoiced Initiative for the Sponsorship Fee on April 30, 2021. Although the invoice did not contain wiring instructions, prior to signing the Agreement, Bemcy had provided Initiative with instructions to send funds to a company called “Y Holdings,” one of Bemcy's partners. Although Gilead transferred close to the full amount of the Sponsorship Fee ($1,993,024.69) to Initiative on May 17, 2021, despite repeated representations to Bemcy that the fee would be paid in a timely manner, it was not.

Instead of payment, Gilead sought to amend the Agreement urging, for example, Bemcy to agree to a set of milestones to achieve before receiving any payment. Despite the back and forth, the parties never agreed to nor executed a modification of the Agreement. On August 2, 2021-long after the 60 days following Initiative's receipt of Bemcy's invoice-Gilead provided Bemcy with a “notice of termination.” Gilead now argues that it provided the notice pursuant to a termination of convenience clause in the Agreement which gives Gilead the right to “terminate this Agreement, without cause, at any time by providing [Bemcy] with thirty (30) days' prior written notice.”

II. STANDARD OF REVIEW

“[S]ummary judgment is appropriate where there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law.” Alabama v. North Carolina, 560 U.S. 330, 344 (2010) (citations and internal quotations omitted); Fed.R.Civ.P. 56. A fact is material where it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). And, a genuine issue is present “when a reasonable trier of fact, viewing all of the record evidence, could rationally find in favor of the non-moving party in light of his burden of proof.” Doe v. Abington Friends Sch., 480 F.3d 252, 256 (3d Cir. 2007). The moving party bears the burden of showing the absence of a genuine issue as to any material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). The non-moving party “may not merely deny the allegations in the moving party's pleadings; instead, he must show where in the record there exists a genuine dispute over a material fact.” Abington Friends Sch., 480 F.3d at 256. In ruling on a summary judgment motion, a court must “view the facts and draw reasonable inferences in the light most favorable to the party opposing the summary judgment.” Scott v. Harris, 550 U.S. 372, 378 (2007) (internal quotations and alterations omitted).

III. DISCUSSION

a. Breach of the Agreement

Both parties move for summary judgment on Bemcy's breach of contract claim. Under Pennsylvania law, to prove breach of contract a plaintiff must sufficiently show: “(1) the existence of a contract, including its essential terms, (2) a breach of a duty imposed by the contract, and (3) resultant damages.” Ware v Rodale Press, Inc., 322 F.3d 218, 225 (3d Cir. 2003) (citing CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa. Super. 1999)). Both parties focus on whether there was a breach. Bemcy argues that Gilead breached the Agreement by failing to pay it the Sponsorship Fee by June 29, 2021, i.e. 60 days after Bemcy sent its invoice to Initiative. In response, Gilead argues that it “terminated” the Agreement; thus, in its view, there was no contract to breach.

A party breaches a contract when it fails to do something that it has expressly undertaken to do in an agreement. Johnson v. Fenestra, Inc. (Erection Division), 305 F.2d 179 (3d Cir. 1962) (applying Pennsylvania law). In particular, “when performance of a duty under a contract is due, any nonperformance is a breach.” Linde v. Linde, 210 A.3d 1083, 1091 (2019) (Pa. Super. 2019); True R.R. Assocs., L.P. v. Ames True Temper, Inc., 152 A.3d 324, 339 (Pa. Super. 2016).

Here, Schedule B states that “[Initiative] on behalf of [Gilead] shall pay BEMCY within [] 60 days of receipt of invoice via wiring instructions provided with the invoice.” Thus, Gilead's obligation to pay the Sponsorship Fee became due 60 days after Initiative received Bemcy's invoice. Neither party disputes that Bemcy sent an invoice to Initiative for $2 million on April 30, 2021, or that it was received. Nor is it disputed that the Sponsorship Fee was not paid in a timely manner or that it has not since been paid. Further, neither party suggests that the language of Section 2 or Schedule B of the Agreement is in any way ambiguous as to Gilead's duty: to pay Bemcy $2 million 60 days after Bemcy invoiced Initiative. Because Gilead “fail[ed] to do something that it ha[d] expressly . . . undertaken to do” Gilead breached the contract. And its breach-in the form of failure to pay Bemcy-was material, because provision of the Sponsorship Fee “goes to the . . . essence of the contract.” LJL Transp., Inc. v. Pilot Air Freight Corp., 962 A.2d 639, 650 (Pa. 2009).

Nevertheless, Gilead argues that the Agreement could not have been breached because it was terminated by Gilead pursuant to Section 6.2-a termination for convenience provision- which provides in relevant part: “[Gilead] may terminate this Agreement, for convenience, without cause, at any time” with thirty days' notice. Be that as it may, when it sent the “notice of termination” on August 2, 2021, it had already materially breached the Agreement over a month before by not paying the Sponsorship Fee. And that breach had several effects. First, it excused any performance on the part of Bemcy, the non-breaching party. Linde, 210 A.3d at 1091. Second, it effectively “end[ed] [the] contract.” 1 Corbin on Pennsylvania Contracts § 6.06 (2021). And finally, it disabled Gilead from taking advantage of the “termination for convenience” clause, regardless of whether Gilead had given Bemcy proper notice, because “a power of termination typically has a prospective operation, discharging parties from executory duties, but not discharging breaches that have already occurred.” Id.; see also Sullivan v Charwell Investment Partners, LP, 873 A.2d 710 (Pa. Super. 2005). Put simply, the termination for convenience clause was not available to Gilead post its breach for failure to pay.^[1]

Gilead also argues that the Agreement should be voided under the doctrine of “unclean hands”. Specifically, it contends that prior to entering the Agreement Bemcy misrepresented its experience and qualifications through pitch materials and budget documents supplied to Gilead. An agreement may be voided due to “unclean hands” if the defendant demonstrates that the plaintiff “has committed an unconscionable act immediately related to the [relief] the party seeks in . . . the litigation.” Highmark, Inc. v. UPMC Health Plan, Inc., 276 F.3d 160, 174 (3d Cir. 2001); see also Knit With v. Knitting Fever, Inc., 2009 WL 973492, at *11 (E.D. Pa. 2009) (quoting Merisant Co. v. McNeil Nutritionals, LLC, 515 F.Supp.2d 509, 530-31 (E.D. Pa. 2007)) (applying Pennsylvania law) (unclean hands applies when “plaintiff's conduct is inequitable and [] involves the subject matter of the plaintiff's claim.”). A defendant asserting an unclean hands defense must introduce “clear, convincing evidence of ‘egregious' misconduct.” Citizens Fin. Group, Inc. v. Citizens Nat'l Bank, 383 F.3d 110, 129 (3d Cir.2004). “Egregious misconduct” can take the form of “fraud, unconscionability, or bad faith on the part of the plaintiff.” S & R Corp. v. Jiffy Lube Int'l, Inc., 968 F.2d 371, 377 n.7 (3d Cir. 1992).

Here Gilead maintains that Bemcy engaged in “egregious and inequitable conduct” by misrepresenting “the length of time which BEMCY had existed”; “the amount of experience that BEMCY possessed”; as well as...