Toppy v. Passage Bio, Inc.

285 A.3d 672

Eric TOPPY, Appellant

v.PASSAGE BIO, INC., Appellee

No. 24 EDA 2021

Superior Court of Pennsylvania.

Argued July 21, 2021

Filed November 9, 2022

Noah J. Goodman, Philadelphia, for appellant.

Michael L. Banks, Philadelphia, for appellee.

BEFORE: BOWES, J., STABILE, J., and MUSMANNO, J.

OPINION BY STABILE, J.:

In this employment dispute, Appellant, Eric Toppy, filed a five-count complaint against Appellee, Passage Bio, Inc., alleging that Appellee breached a settlement agreement that resolved Appellant's wrongful termination claims against Appellee. Appellee filed preliminary objections in the nature of demurrers asserting, inter alia , that the parties never entered a binding settlement agreement. The trial court sustained Appellee's preliminary objections and dismissed the complaint with prejudice. Appellant appeals from the order of dismissal. We affirm in part and reverse in part. We reverse the dismissal of Appellant's claims for breach of the settlement agreement and violation of the Wage Payment Collection Law ("WPCL"), 43 P.S. §§ 260.1 — 260.13. We affirm the dismissal of Appellant's claims for unjust enrichment, fraudulent misrepresentation and negligent misrepresentation.

Appellant's complaint alleges the following. Appellee is an emerging growth company engaged in the development of gene therapies for the treatment of rare central nervous system diseases. In April 2019, based on his prior employment in the health care industry and his relationships with rare disease patient organizations, Appellee hired Appellant as Vice President of Patient Engagement and Market Access. As compensation, Appellee agreed to pay Appellant an annual salary of $260,000 and a bonus targeted at 25% of his base salary. Appellee also granted Appellant 448,623 stock options which were to vest over the ensuing four years.

In October 2019, while Appellant was on a business trip for Appellee in Europe, Appellant's supervisor, Ms. Quigley, sent Appellant an e-mail stating that she intended to terminate his employment. On his return, Appellant met with Appellee's general counsel, who told him that his employment was at an end effective October 25, 2019. Having consulted and retained counsel, Appellant then asserted¹ three employment-related claims for relief against Appellee: (1) disability discrimination; (2) misrepresentation related to the forfeiture of the 448,623 stock options he had been granted; and (3) defamation related to pejorative comments that Quigley made about him to third parties.

Appellant and Appellee agreed to mediate his claims before Patricia McInerney, a former common pleas judge. Complaint, ¶¶ 2, 4. On January 30, 2020, the mediation took place. Id. at ¶ 25. The parties reached agreement on two of the three settlement terms that Appellant proposed, namely payment by Appellee of eight months of Appellant's annual salary and a 25% bonus pro-rated for eight months. Id. at ¶ 26. What remained unresolved was the number of shares of common stock Appellee agreed to issue to Appellant in exchange for his 448,623 stock options.² Id. at ¶ 27. Settlement negotiations continued over the weekend regarding the number of shares of stock to be issued to Appellant. Id. at ¶ 28. On Monday, February 3, 2020, Appellee agreed to issue Appellant 150,000 shares of common stock. Id.

On February 3, 2020, Judge McInerney sent an e-mail to Appellant's counsel, Harold Goodman that stated as follows:

I just got out of a meeting and Susan has replied accepting your proposal:

I just heard back from my client. They agree to the terms [Appellant's counsel] suggested (150,000 shares, 8 months’ severance, 25% bonus pro-rated for 8 months, etc.), with two small tweaks:

1. They want to add Lysogene to the list of companies where [Appellant] cannot work (the others are Axovant and Prevail Therapeutics).

2. Regarding the letter of reference, Steve Squinto is willing to state something like Eric's role changed and he wanted to leave so that he could continue to work in patient engagement. He does not want to address Eric's performance as he did not supervise Eric and obviously, Eric's supervisor was critical of his performance.

They also wanted me to make clear that this is their final position. Id. , ex. 1. Nothing in this email stated or suggested that the stock would be subject to a pre-IPO (initial public offering) reverse stock split. The complaint alleged that the email constituted an agreement because it resolved the final issue between the parties. Id. at ¶ 28 ("Following discussions over the weekend, the parties reached agreement on that remaining issue [the number of shares of common stock]. Specifically, as reflected in the attached Monday, February 3, 2020 e-mail from Judge McInerney, [Appellee] agreed with [Appellant's] counsel to issue him 150,000 shares of its Common Stock").

On February 12, 2020, counsel for Appellee sent Appellant's counsel a draft settlement agreement and release to review. The draft accurately described the severance and bonus payments that Appellant would receive. The draft stated that Appellee would issue Appellant 150,000 shares of its Common Stock, but it added in a vague parenthesis that the number "may be adjusted by stock splits, stock combinations, recapitalizations or the like." Id. at ¶ 31. Unbeknownst to Appellant at that time, Appellee already intended to authorize a pre-IPO reverse split³ of its common stock. Id. at ¶ 32. Appellee was aware of this internal decision at the time of the mediation before Judge McInerney (January 30, 2020) and on the day it agreed to issue Appellant 150,000 shares of its common stock (February 3, 2020). Id. at ¶ 33. Despite that, Appellee never said anything to Appellant about the reverse stock split until more than two weeks later. Id. at ¶ 34. On February 18, 2020, counsel for Appellee informed Appellant's counsel that four days earlier (February 14, 2020), Appellee's Board of Directors had met and authorized a 4.43316 reverse split of its common stock. Id. No notice of that meeting was sent to Appellant or his counsel. Id. at ¶ 36. In effect, without Appellant's agreement, Appellee unilaterally decided to reduce the agreed upon shares of common stock to be issued to Appellant from 150,000 to 33,836 shares. Id. at ¶ 34. This occurred after the parties already agreed to issue Appellant 150,000 shares in exchange for his 448,623 stock options, or approximately 33% of the options.

Appellant refused to sign the draft settlement agreement that Appellee sent to Appellant's counsel on February 12, 2020. Appellee's Brief at 5.

In an initial public offering on February 28, 2020, Appellee's stock opened on the NASDAQ Exchange at $18.00 per share. Id. at ¶ 41. Based on this opening share price, the difference between the value of 150,000 shares of Appellee's common stock and 33,836 shares is in excess of $2 million. Id. at ¶ 44.

Appellant requested that Appellee comply with the terms of the agreement that Appellant envisioned: payment of eight months of salary, a 25% bonus pro-rated for eight months, and distribution of 150,000 shares of common stock to Appellant. Appellee refused. Appellant thereupon commenced the present action by filing a five-count complaint against Appellee. Count I alleged that Appellee breached the parties’ settlement agreement and requested "enforcement in full of the parties February 3, 2020 settlement agreement, including payment of the severance and bonus he is due, and an injunction compelling Passage Bio to issue him 150,000 shares of its Common Stock." Count I, Prayer for Relief. Counts II and III alleged claims for intentional and negligent misrepresentation against Appellee based on its failure to disclose its reverse stock split to Appellant. Count IV asserted a claim for unjust enrichment. Count V alleged a claim for violation of the WPCL.

Appellee filed preliminary objections to the complaint in the nature of demurrers. Appellee's sole basis for demurrer to Appellant's claim for breach of the settlement agreement was that Appellant repudiated the settlement agreement, and thus could not enforce it, because he raised claims for intentional and negligent misrepresentation in Counts II and III of his complaint. Appellee "dispute[d] that the parties ever entered into an enforceable contract," but for purposes of its preliminary objections, it "accept[ed] as true" what it called the "factual allegation[ ]" that "an enforceable contract was formed." Appellee's Memorandum In Support Of Preliminary Objections to Complaint, at 7 n.4.⁴

Appellant filed a timely answer to the preliminary objections, and Appellee filed a reply brief in support of its preliminary objections.

In a November 24, 2020 memorandum and order, the trial court sustained Appellee's preliminary objections and dismissed the complaint in its entirety. This timely appeal followed. The trial court did not order Appellant to file a Pa.R.A.P. 1925 statement of matters complained of on appeal.

Appellant raises the following issues in this appeal:

I. In sustaining [Appellee's] preliminary objection and dismissing [Appellant's] claim for breach of the parties’ settlement agreement, did the trial court commit reversible error by:

A. ignoring [Appellee's] concessions that the parties did enter into a binding settlement agreement;

B. disregarding the allegations in the Complaint that the parties did reach an enforceable settlement agreement;

C. misconstruing the mediator's e-mail (Exh. 1 to the Complaint) regarding the substance of the parties’ settlement agreement?

II. In sustaining [Appellee's] preliminary objection and dismissing [Appellant's] claim for unjust enrichment, did the trial court commit reversible error by:

A. failing to recognize that a claim for unjust enrichment is a judicially recognized alternative to one for breach of contract; and

B. disregarding the allegations in the Complaint that [Appellee] wrongfully secured a general release of claims from [Appellant] while unjustly retaining all

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