VEP Biotech LTD. v. Quadrant Biosciences, Inc.

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VEP BIOTECH LTD, Plaintiff, v. QUADRANT BIOSCIENCES, INC., Defendant.

No. 5:23-CV-1428 (GTS/ML)

United States District Court, N.D. New York

September 19, 2024

REED SMITH LLP ANDREW S. WONG, ESQ. BENJAMIN C. WATSON, ESQ. Counsel for Plaintiff

BOND SCHOENECK & KING, PLLC LIZA R. MAGLEY, ESQ. BRIAN J BUTLER, ESQ. Counsel for Defendant

HUSCH BLACKWELL LLP BRANDON S. STEIN, ESQ. TIMOTHY P. RIBELIN, ESQ Co-counsel for Defendant

DECISION AND ORDER

GLENN T. SUDDABY, UNITED STATES DISTRICT JUDGE

Currently before the Court, in this breach of contract action filed by VEP Biotech LTD (“Plaintiff” or “VEP”) against Quadrant Biosciences, Inc. (“Defendant”), is Plaintiff's motion for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c). (Dkt. No. 32.) For the reasons set forth below Plaintiff's motion is denied.

I. RELEVANT BACKGROUND

A. Plaintiff's Complaint and Defendant's Counterclaim

Generally, in its Complaint, Plaintiff asserts a claim for breach of contract premised on allegations that Defendant failed to comply with its obligations under a Convertible Note (“Note”) executed by the parties as part of a broader Note Purchase Agreement (“Agreement”). (Dkt. No. 1, at ¶¶ 1-6.) More specifically, Plaintiff alleges that Defendant failed to provide the required payment of the Note's principal amount of $5,000,000, plus interest, to Plaintiff at any time before or after the maturity date of the Note, despite the fact that Plaintiff provided adequate notice to Defendant that it was in breach of its obligations under the Note. (Id.)

In its Answer to Plaintiff's Complaint, Defendant asserts a counterclaim for breach of contract against Plaintiff based on allegations that Plaintiff breached its obligation to purchase the second and third Convertible Notes as set forth in the terms of the Agreement. (Dkt. No. 15, at 7-17.) It further asserts that this prior material breach acts as an affirmative defense to Plaintiff's breach-of-contract claim. (Id. at 7.)

B. Parties' Briefing on Plaintiff's Motion for Judgment on the Pleadings

1. Plaintiff's Memorandum of Law

Generally, in its motion for judgment on the pleadings, Plaintiff makes three arguments. (Dkt. No. 23, Attach. 1.) First, Plaintiff argues that it has established as a matter of law a prima facie case of default on the relevant Note because it has alleged that (a) the Note was validly created, and (b) Defendant failed to pay any amount on that Note from the date of issuance through the date of maturity, or at any time after the date of maturity after VEP made a demand for immediate payment in accordance with the terms of the Note. (Id. at 6-8.)

Second, Plaintiff argues that Defendant's Answer to the Complaint fails to raise any issue of fact or law that would preclude entry of judgment on the pleadings as to Plaintiff's claim because Defendant's answer either admits or fails to validly deny (a) the relevant allegations in Plaintiff's Complaint regarding the material terms of the Note, (b) Defendant's failure to make payment as required under the terms of the Note, (c) the fact that Plaintiff made a demand for payment after the date of maturity according to the terms of the Note, and (d) other relevant facts. (Id. at 8-9.)

Third, Plaintiff argues that Defendant's affirmative defenses and counterclaim do not present a basis for denying the motion for judgment on the pleadings as to Plaintiff's claim for breach of contract, because such defenses and counterclaim are immaterial given that nothing in the Agreement permits Defendant to withhold repayment on any of the Notes purchased thereunder in the event of a breach of the Agreement. (Id. at 10-13.) Specifically, Plaintiff argues that Defendant had an absolute and unconditional obligation to pay under the Note that in no way depends on whether Plaintiff met its obligation to purchase other, additional Notes under the Agreement. (Id.)

2. Defendant's Opposition Memorandum of Law

Generally, in opposition to Plaintiff's motion, Defendant makes three arguments. (Dkt. No. 25.) First, Defendant argues that, contrary to Plaintiff's assertion, it has not conceded the issue of liability on Plaintiff's claim, but rather affirmatively stated in its responses that, although it did not make any payments on the Note, such action was because Plaintiff had committed a prior material breach of the Agreement and therefore Defendant was excused from future performance. (Id. at 8-9.)

Second, Defendant argues that its affirmative defense of Plaintiff's prior material breach of the Agreement precludes judgment on the pleadings. (Id. at 9-17.) More specifically, Defendant argues that (a) New York law presumes that instruments entered into at the same time and for the same purpose (such as the Agreement and relevant Note) should be construed together and thus a breach of one agreement impacts the other, especially because here the Note explicitly incorporates the terms of the Agreement, and (b) at the very least, the issue of whether the Agreement and the Note are one agreement is a factual issue reliant on an assessment of the intent of the parties that cannot be resolved on a motion pursuant to Fed.R.Civ.P. 12(c). (Id.)

Third, Defendant argues that granting judgment on the pleadings at this stage is also not warranted because, regardless of whether Plaintiff's claim is resolved, proceedings will continue related to Defendant's counterclaim, and thus resolution of that claim would not change the trajectory or narrow the scope of this litigation, such that the more appropriate course of action would be to allow all of these issues to proceed together into discovery. (Id. at 17-18.)

3. Plaintiff's Reply Memorandum of Law

Generally, in reply to Defendant's opposition, Plaintiff makes three arguments. (Dkt. No. 26.) First, Plaintiff argues that judgment on the pleadings is warranted on its claim because, contrary to Defendant's argument, there is no material dispute of fact that must be resolved to reach such an outcome given that Defendant's Answer does not sufficiently deny that all the requirements of that claim are met as a matter of law based on the allegations in Plaintiff's Complaint. (Id. at 5-6.)

Second, Plaintiff argues that Defendant's assertion that Plaintiff engaged in a prior material breach of the Agreement does not preclude judgment on the pleadings, because the fact that the Agreement and the Note must be read together (a fact that Plaintiff does not dispute) does not mean that Defendant was not subject to an unconditional obligation to make payment on the Note. (Id. at 6-9.) More specifically, Plaintiff argues that nothing in the unambiguous terms of the Agreement even suggests that Defendant's obligations under the executed Note are in any way contingent on Plaintiff's performance of the remainder of the Agreement. (Id.) It further argues that New York law supports an entry of judgment on the pleadings. (Id. at 9-12.)

Third, Plaintiff argues that Defendant's argument that its counterclaim would survive any motion for judgment on the pleadings does not stand as a basis for denying Plaintiff's motion, because “there is no efficiency to be gained by maintaining a live controversy that can be summarily resolved on the undisputed facts and contract terms,” and “[t]he future scope and direction of this case are irrelevant and immaterial to the appropriateness of granting [Plaintiff's] [m]otion.” (Id. at 13.)

II. GOVERNING LEGAL STANDARD

Rule 12(c) of the Federal Rules of Civil Procedure provides that “after the pleadings are closed - but early enough not to delay trial - a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). Judgment on the pleadings, pursuant to Fed.R.Civ.P. 12(c) is appropriate where material facts are undisputed and a judgment on the merits is possible merely by considering the contents of the pleadings. Sellers v. M.C. Floor Crafters, Inc., 842 F.2d 639, 642 (2d Cir. 1988); Allstate Ins. Co. v. Vitality Physicians Grp. Prac. P.C., 537 F.Supp.3d 533, 545 (S.D.N.Y. 2021). “Judgment pursuant to Rule 12(c) can be particularly appropriate in breach of contract cases involving legal interpretations of the obligations of the parties” because “initial interpretation of a contract is a question of law for a court.” VoiceAge Corp. v. RealNetworks, Inc., 926 F.Supp.2d 524, 529 (S.D.N.Y. 2013).

A motion for judgment on the pleadings is governed by “the same standard” as a motion to dismiss under Rule 12(b)(6). Hayden v. Paterson, 594 F.3d 150, 160 (2d Cir. 2010) (quoting Johnson v. Rowley, 569 F.3d 40, 43 [2d Cir. 2009]). The Court therefore must accept as true all of the non-movant's well pleaded factual allegations and draw all reasonable inferences in favor of the non-movant. Davidson v. Flynn, 32 F.3d 27, 29 (2d Cir. 1994). “When a plaintiff moves for judgment on the pleadings, the question for determination is whether on the undenied facts alleged in the complaint and assuming as true all the material allegations of fact in the answer, the plaintiff is entitled to judgment as a matter of law.” Allstate Ins. Co., 537 F.Supp.3d at 545 (internal quotation marks omitted).

“On a 12(c) motion, the court considers ‘the complaint, the answer, any written documents attached to them, and any matter of which the court can take judicial notice for the factual background of the case.'” L-7 Designs Inc. v. Old Navy, LLC, 647 F.3d 419, 422 (2d Cir. 2011) (quoting Roberts v. Babkiewicz, 582 F.3d 418, 419 [2d Cir. 2009]). The Court may also review any document incorporated by reference into one of the pleadings and any document that is not incorporated by reference but on which the complaint relies and which is integral to it. Sira v. Morton, 380 F.3d 57, 67 (2d Cir. 2004); Lively v....