Steady State Imaging, LLC v. General Electric Company

Background

In 2011, Steady State Imaging, LLC and General Electric Company entered an Asset Purchase Agreement concerning the commercialization of SWIFT, a magnetic resonance imaging technique developed by Dr. Michael Garwood and licensed by Steady State. The opinion states that GE never commercialized SWIFT.

After an earlier summary-judgment ruling, Steady State’s claims for breach of an oral contract and promissory estoppel remained for trial. The jury found no enforceable oral contract but found that Steady State proved its promissory-estoppel claim. The jury found that GE made a clear and definite promise to commercialize SWIFT in a Silent Brain application, intended to induce Steady State’s reliance, and that Steady State reasonably relied on the promise and suffered losses or disadvantage. The jury awarded $10 million and found that the promise could be fully performed within one year.

Promissory Estoppel

Under Minnesota law, promissory estoppel can create an enforceable obligation even when there is no enforceable contract. The court explained that the relevant questions were whether GE made a clear and definite promise, whether GE intended to induce reliance and Steady State relied, and whether enforcing the promise was required to prevent injustice. The jury resolved the first two issues in Steady State’s favor. The court had to decide the injustice question as a matter of law.

Reasonableness of Reliance

The court agreed with the jury that Steady State’s reliance was reasonable. It rejected GE’s arguments that reliance was unreasonable because GE had negotiated discretion not to commercialize SWIFT under the Asset Purchase Agreement, because the September 2014 promise did not match Steady State’s proposed terms, or because the later promises contradicted the written agreement.

The court stated that the agreement did not say GE would never commercialize SWIFT; it gave GE sole discretion over the commercialization process. The later promise to commercialize SWIFT therefore added to, rather than directly contradicted, GE’s original obligations. The court also noted evidence that circumstances had changed after the agreement and that Steady State had threatened legal action, making reliance on GE’s later promise reasonable.

Formality and Definite and Substantial Character

The court considered the formality, definiteness, and substantial character of GE’s promises as factors in deciding whether enforcement was necessary to prevent injustice. It found that the September 2014 promise was made in a sufficiently formal setting because it followed discussions between the parties, an ultimatum from Steady State, and an internal GE discussion. The court agreed that statements made at trade shows were less formal.

The court nevertheless found all of the promises definite and substantial. At a 2011 meeting, GE stated that it was committed to launching a SWIFT product. At a 2013 meeting, GE stated that it was moving forward with SWIFT, that Steady State would make a lot of money, and that there was no need to worry about commercialization. In September 2014, GE communicated that it had discussed the issue internally and decided to move forward with SWIFT. The court found that this factor weighed slightly in favor of enforcement.

Cautionary, Deterrent, and Channeling Functions

GE argued that this factor favored refusing enforcement because there was no conduct to caution against or deter and because GE had not intentionally assumed an enforceable obligation. The court rejected that argument as inconsistent with the jury’s findings that GE intentionally made a clear and definite promise to induce Steady State’s reliance.

The court concluded that enforcing the promise would caution against and deter similar conduct because GE made the promise in the hope that Steady State would refrain from taking legal action. The court also rejected GE’s reliance on the court’s earlier reference to confusion, miscommunication, and misunderstanding, explaining that those statements concerned a different issue involving the statute of frauds, not whether GE intentionally made the promises found by the jury.

Public Policy and Unjust Enrichment

The court found that public-policy considerations favored enforcement. It concluded that Steady State refrained from suing GE or trying to reacquire the SWIFT rights because of GE’s promises. The court also found that GE received benefits from the promises, including a competitive advantage in quiet magnetic resonance imaging, even though GE did not ultimately make money by launching a SWIFT product.

The court rejected GE’s argument that enforcement would improperly alter the Asset Purchase Agreement or unjustly enrich Steady State. It treated the later promises as separate from, and additional to, GE’s obligations under that agreement. The court further explained that the agreement’s royalty provisions would have applied if GE had commercialized SWIFT, and it found no provision eliminating those royalties if GE later undertook an obligation to commercialize the technology.

Disposition

The court held that enforcement of GE’s promise was required to prevent injustice and therefore found the third element of promissory estoppel satisfied. It ordered that judgment be entered for Steady State against GE in the amount of $10 million.