Therapure Biopharma, Inc. v. DynPort Vaccine Co.

THERAPURE BIOPHARMA, INC., Plaintiff, v. DYNPORT VACCINE COMPANY LLC, Defendant.

Civil Action No. RDB-19-2092

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

June 5, 2020

MEMORANDUM OPINION

At issue in this case is an agreement between Plaintiff Therapure Biopharma, Inc. ("Plaintiff" or "Therapure") and Defendant DynPort Vaccine Company LLC ("Defendant" or "DVC") with respect to a subcontract to provide goods and services in connection with the development of a nerve agent antidote for military and commercial purposes. Therapure alleges that DVC failed to meet its obligations under the parties' contract and asserts four claims in its Amended Complaint against DVC: breach of contract (Count I); quantum meruit (Count II); and unjust enrichment (Counts III and IV). Presently pending is Defendant's Motion to Dismiss Plaintiff's Amended Complaint. (ECF No. 31.) The parties' submissions have been reviewed, and no hearing is necessary. See Local Rule 105.6 (D. Md. 2018). For the reasons that follow, Defendant's Motion to Dismiss (ECF No. 31) shall be GRANTED IN PART and DENIED IN PART. Specifically, Counts II, III, and IV will be DISMISSED.

BACKGROUND

In ruling on a motion to dismiss, this Court "accept[s] as true all well-pleaded facts in a complaint and construe[s] them in the light most favorable to the plaintiff." Wikimedia Found. v. Nat'l Sec. Agency, 857 F.3d 193, 208 (4th Cir. 2017) (citing SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412, 422 (4th Cir. 2015)). The Court may consider only such sources outside the complaint that are, in effect, deemed to be part of the complaint, for example, documents incorporated into the complaint by reference and matters of which a court may take judicial notice. Sec'y of State for Defence v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007).

Plaintiff Therapure is a privately held business organized and existing under the laws of Ontario, Canada with its principal place of business and headquarters in Mississauga, Ontario. (Am. Compl. ¶ 9, ECF No. 27.) It consists of two business units: (1) a Contract Development and Manufacturing Organization that provides a range of therapeutic protein development manufacturing services and (2) a product unit "focused on commercializing plasma proteins derived primarily using its proprietary technology." (Id.) Defendant DVC is a corporation organized under the laws of Virginia, with its principal place of business and headquarters in Frederick, Maryland.¹ (Id. ¶ 10.) DVC manages product development programs for the United States and international government entities and provides consulting services to biotechnology and pharmaceutical companies. (Id.)

I. The Basic Ordering Agreement

In or around May of 2013, Therapure and DVC entered into a Basic Ordering Agreement ("BOA"), under which Therapure was subcontracted by DVC to provide certain goods and services in support of the development of a nerve agent antidote. (Id. ¶¶ 1, 13, 18; BOA, ECF No. 31-4².) DVC had the prime contract with the Department of Defense("DoD") to develop the antidote.³ (Am. Compl. ¶ 1.) Therapure alleges that, under the subcontractor's proposal incorporated by reference in the BOA, the parties agreed to certain assumptions regarding the paste material that would be used in the clinical trials for the approval of the nerve antidote. (Id. ¶¶ 15, 17, 19.) Specifically, Therapure alleges that the proposal included the following assumptions about the paste: "DVC would deliver Cohn Fraction IV-4 paste, meeting acceptance criteria outlined by Therapure; DVC-procured Cohn Fraction IV-4 paste would be sourced from FDA-approved collection centers, would meet FDA requirements, and would have undergone testing for pathogens; and would meet certain requirements regarding average yield, failure rate, and purity." (Id. ¶ 17.)

Therapure alleges that the BOA requires DVC to reimburse Therapure for various performance-related costs and that the BOA establishes procedures for Therapure to submit Requests for Equitable Adjustments ("REAs"), seeking recovery of additional unexpected costs for which it believes DVC is liable. (Id. ¶ 20.) The BOA also contains a "quality assurance" provision, requiring that the goods and services are developed according to the terms of the BOA and the applicable task order. (Id. ¶ 21.) In addition, the BOA contains a "Notice of Delay" provision and "invoice instructions." (Id. ¶ 22; BOA, ECF No. 31-4.) The Notice of Delay provision provides, "[i]n the event that DVC has knowledge that any actualsituation may delay or threaten to delay the timely performance of this Subcontract...DVC shall, within five (5) business days provide written notification to Therapure's Project Manager of the nature of the anticipated delay." (Id.) The invoice instructions provide that DVC would pay Therapure "the amounts specified" by Therapure "in duly prepared and submitted invoices, subject to the resolution of any questions the Contractor may have about the services performed or amounts invoiced." (Id.)

Finally, Therapure alleges that the BOA contains specific procedures regarding the resolution of disputes, none of which cite, quote, contain, reference, or incorporate the "Disputes Clause" of the Federal Acquisition Regulations ("FAR"), 48 C.F.R. § 52.233-1. (Am. Compl. ¶ 24.) Instead, Therapure alleges that, under the BOA, "any disputes that do not involve a decision by the contracting officer with respect to the prime contract 'shall be decided by DVC,' unless Therapure notified DVC within thirty days that it disagreed with such decision, in which case Therapure 'may proceed to have the dispute settled through appropriate legal action.'" (Id. ¶ 23.) Therapure alleges that it would not have executed the BOA absent retention of certain commercial rights to manufacture the developed product, which was also memorialized in a separate License Agreement between Therapure and DVC. (Id. ¶¶ 25, 26; License Agreement, ECF No. 31-5.) Therapure estimates the revenue opportunity associated with these rights as worth approximately $100 million per year. (Id.)

II. Therapure "stands ready"

Therapure alleges that DVC issued stop work orders on at least two separate occasions throughout the course of contract performance, during which Therapure was obligated to maintain a "stand ready" state. (Am. Compl. ¶ 28.) This "stand ready" state requiredTherapure to maintain resources, including personnel, to immediately recommence performance of the contract when directed. (Id.) Therapure alleges that it was the parties' pattern, practice, and course of conduct for Therapure to submit REAs to DVC for the unexpected costs associated with these delays, for which DVC would evaluate, sign, and execute the requests and, in turn, submit them to the DoD for execution and payment. (Id. ¶¶ 28, 29.)

One of the "stand ready" occasions occurred in or around 2015, when Therapure alleges that the paste product provided by DVC was not viable and contract performance could not continue without obtaining a new paste product. (Id. ¶ 30.) Performance was put on hold for approximately nine months because of DVC's alleged delay in resolving the issue. (Id.) DVC's alleged failure to provide adequate paste resulted in ongoing and continuing delays to contract performance, lower yield, and more than $12 million in costs to Therapure. (Id. ¶ 31.) Specifically, Therapure alleges that, in or around 2017, DVC provided aged paste that had become or was close to becoming unsuitable and unstable and that DVC insisted that Therapure use the aged paste over Therapure's objections, resulting in Therapure having to absorb the cost of its failed experiments. (Id. ¶ 35.) On or about July 13, 2018, Therapure submitted a Request for Equitable Adjustment to DVC for the period of March 2017 to May 2018 for "Total Lost Opportunity Due to Paste Age and Quality and Funding Limitations" in the amount of $12,051,451.16. (Id. ¶ 36.) Therapure alleges that DVC has failed to reimburse Therapure for this amount owed and resulting from DVC's refusal to provide proper quality paste. (Id.)

On or about May 24, 2018, DVC issued another stop work order to Therapure "due to limited funding from DoD." (Am. Compl. ¶ 37.) Therapure alleges that it had almost successfully developed a viable product when this stop work order was issued. (Id.) Therapure was required to remain in a "stand ready" state for re-initiation at any time upon removal of the stop work order by DVC, which Therapure alleges caused it significant additional costs. (Id. ¶ 38.) Starting on or about July 13, 2018, Therapure submitted the first in a series of Requests for Equitable Adjustments for $1,776,526.13 in costs incurred as a result of the stop work order and Therapure having to maintain necessary contract resources in its "stand ready" state. (Id. ¶ 39.) Therapure submitted additional REAs on August 1, 2018 for $1,914,650.22, August 30, 2018 for $1,914,650.22, and October 1, 2018 for $1,701,416.98, for its continued "stand ready" state as a result of DVC's ultimately extending the stop work order until January 25, 2019. (Id. ¶¶ 40-46.) The REAs covered resource costs, suite maintenance costs, and expired material costs. (Id.)

On or about October 4, 2018, DVC allegedly agreed to submit Therapure's REAs to the DoD for reimbursement. (Id. ¶ 47.) DVC also requested additional documentation from Therapure to substantiate the costs identified, which Therapure provided to DVC on or about October 29, 2018. (Id. ¶ 48.) On or about November 5, 2018, Therapure submitted an invoice proposal for $6,401,836.77, outlining the estimated future costs associated with maintaining its "stand ready" state from the period of October 2018 until January 25, 2019. (Id. ¶ 49.) Therapure submitted another REA on or about January 2, 2019 for costs incurred in October, 2018 and November, 2018 in the amount of $3,364,464.36. (Id. ¶ 51.) On or about January 30, 2019, DVC extended its stop...