Pharma Conference Educ. v. State

1

PHARMA CONFERENCE EDUCATION, INC. v. STATE OF TENNESSEE

No. W2021-00999-COA-R3-CV

Court of Appeals of Tennessee, Jackson

March 13, 2023

Session November 8, 2022

Appeal from the Tennessee Claims Commission for the Western Division No. K20171856 Commissioner James A. Hamilton, III

This appeal arises from a breach of contract case that concerned whether the contract at issue lacked consideration due to an illusory promise. Specifically, the terms of the contract provided that the plaintiff would produce as many programs "as is feasible." The parties filed competing motions for summary judgment. The claims commission granted the State of Tennessee's motion for summary judgment finding that the contract between the parties was devoid of consideration due to an illusory promise and was therefore unenforceable. Additionally, the claims commission denied the plaintiff's motion for summary judgment as to liability and denied the plaintiff's motion for summary judgment as to damages finding that the issue was moot. The plaintiff appeals. We affirm.

Tenn R. App. P. 3 Appeal as of Right; Judgment of the Claims Commission Affirmed

William F. Burns, William E. Routt, III, and Frank L. Watson III, Memphis, Tennessee, for the appellant, Pharma Conference Education, Inc.

T. Harold Pinkley, Jr. and Rebecca P. Tuttle, Associate General Counsel for the University of Tennessee, for the appellee, State of Tennessee.

Carma Dennis McGee, J., delivered the opinion of the court, in which Arnold B. Goldin and Kenny W. Armstrong, JJ., joined.

OPINION

CARMA DENNIS MCGEE, JUDGE

I. Facts &Procedural History

Pharma Conference Education, Inc. ("Pharma") was in the business of creating and producing scientific and Good Manufacturing Practices^[1] continuing-education conferences or programs for the pharmaceutical industry. Pharma was created in 1994 by Mr. John W. Smith, who planned and produced approximately 190 educational programs as its president over the course of a 23-year period. Dr. Thomas G. Bird was Mr. Smith's business partner and joined Pharma's management team in 2014.

In March 2016, Dr. Bird approached Dr. Kennard D. Brown, who was the Executive Vice Chancellor and Chief Operations Officer of the University of Tennessee Health Science Center ("UTHSC"), to discuss promoting UTHSC through Pharma's educational programs. After a subsequent meeting, Mr. Smith drafted and emailed a proposed Memorandum of Understanding to Dr. Brown. Dr. Brown then forwarded the

Memorandum of Understanding to Mr. Anthony A. Ferrara, who was the Vice Chancellor and Chief Financial Officer for UTHSC. In communication with Mr. Smith, Mr. Ferrara revised the Memorandum of Understanding, which was ultimately reviewed and approved by UTHSC.^[2] In July 2016, Pharma and UTHSC entered into the purported contract at issue, which stated in pertinent part as follows:

1. PHARMA will produce as many scientific and/or pharmaceutical programs for consumption by the pharmaceutical and Health Industry as is feasible. PHARMA's president will report to the Chief Operating Officer of UTHSC, any matter which might be of interest to UTHSC relative to the FDA or the programs produced by PHARMA.

a. UTHSC agrees to be the Sponsor of all programs. PHARMA's website and printed material will indicate this sponsorship and UTHSC and/or College of Pharmacy will issue continuing education certification for attendees of programs or conferences.

b. PHARMA agrees to compensate UTHSC for continuing education certification in the amount equivalent to 1% of PHARMA's revenue for each program in Year 1 and 2% of PHARMA's revenue for each program in Year 2. Following years to be negotiated as defined in paragraph 6.

2. PHARMA will have sole responsibility for determining location, marketing, production, registration, contracting, collecting, and printing of brochures and other publications, etc. PHARMA will work closely with the UTHSC Chief Operating Officer to ensure quality programs are produced.

3. UTHSC will cause an advertisement of the relationship with PHARMA to be placed on its website in a prominent location for the duration of the relationship with a link to . . . PHARMA's website.

a. Also, UTHSC agrees PHARMA will place reference to the relationship on its website in a prominent position.

4. PHARMA agrees to organize program committees who will work with UTHSC and PHARMA in developing as many programs as feasible.

5. UTHSC agrees PHARMA will incur significant financial risk in the endeavor. Accordingly, PHARMA will pay all costs incurred in the development of conferences and will be entitled to all revenue received by PHARMA less the accreditation fee noted in paragraph 1. b.

a. PHARMA will hold harmless UTHSC on any conference financial matters.

6. At two (2) years following the execution of this agreement, PHARMA will review financial results for the first two years of this relationship with the Chief Operating Officer of UTHSC and an agreement for revenue sharing will be negotiated.

7. This understanding will be in force for a period of five (5) years with one option to renew for an additional five (5) years unless either party desires to terminate the Agreement.

a. In such case, the party desiring to terminate the Agreement may do so upon giving the non-terminating party one (1) years notice in writing sent by certified mail. Once notice is given, both parties agree no additional programs will be established under this contract.

8. The Period of Performance under this Contract is from July 1, 2016 through June 30, 2021.

9. The PHARMA's maximum liability under this Contract is $200,000.

10.The following changes are agreed to with respect to the University's Receivable Terms and Conditions:

a. Delete Paragraph 3[; and]

b. Modify Paragraph 10 to read "The University or Pharma shall have no liability except as specifically provided in this Contract.["]

The contract also included a page with the "University's Receivable Terms and Conditions," as indicated above in section 10 of the contract. In January 2017, the parties reached an impasse regarding their responsibilities under the contract, and UTHSC terminated the contract. Specifically, Dr. Brown sent a text message to Dr. Bird stating, "I'm over it [Dr. Bird], I'm sending the termination notice to the contract. Thanks for everything."

As a result, Pharma initiated this matter by asserting a claim with the Division of Claims Administration in May 2017. Unable to act on the claim within statutorily allotted 90 days, the Division of Claims Administration transferred Pharma's claim to the claims commission.^[3] In September 2017, Pharma filed its complaint for damages with the claims commission requesting that judgment be entered in Pharma's favor against UTHSC for breach of contract.^[4] The State responded by filing a motion to dismiss for failure to state a claim for breach of contract pursuant to Tennessee Rule of Civil Procedure 12.02(6). The State contended that (1) the alleged contract between UTHSC and Pharma was unenforceable due to the absence of a meeting of the minds between the parties, (2) the alleged contract was merely an "agreement to agree," and (3) Pharma's promise under the alleged contract to produce as many programs "as is feasible" was an illusory promise that did not provide consideration for a valid contract. In March 2018, the claims commission entered an order denying the motion to dismiss. It found that the State's arguments did not serve to form a basis for a motion to dismiss for failure to state a claim. It explained that the State's motion challenged the strength of Pharma's proof rather than the legal sufficiency of the complaint. Afterward, the State filed its answer to the complaint. Pharma was then permitted to file an amended complaint, to which the State filed an answer.^[5]

In April 2021, the State filed a motion for summary judgment. In its supporting memorandum, the State argued that the contract between Pharma and UTHSC was unenforceable due to the absence of a meeting of the minds and that the contract was merely an unenforceable "agreement to agree." The State also argued that Pharma's promise under the terms of the contract to produce as many programs "as is feasible" was an illusory promise which was not consideration for a valid enforceable contract. Pharma filed a motion for summary judgment as to liability and a motion for summary judgment as to damages. In August 2021, the claims commission entered an order granting the State's motion for summary judgment. It specifically found that the contract was "a clear example of a[n] 'illusory' promise." It explained that "Pharma promises nothing and also retains the option of not performing since Pharma possesses sole discretion as to how many scientific and/or pharmaceutical programs will be produced." As such, it found that the contract between Pharma and UTHSC was unenforceable for lack of consideration and that the State had affirmatively negated an essential element of a breach of contract claim. The claims commission also denied Pharma's motion for summary judgment as to liability and found that Pharma's motion for summary judgment as to damages was rendered moot. Thereafter, Pharma timely filed an appeal.

II. Issues Presented

Pharma presents the following issues for review on appeal, which we have slightly restated:

1. Whether the claims commission erred by granting the State's motion for summary judgment as to liability based on its finding that there was no consideration for the contract at issue, thereby rendering it unenforceable;

2. Whether the claims commission erred by denying Pharma's motion for summary judgment as to liability where Pharma established that the contract at issue was supported by

...