ANI Pharmaceuticals, Inc. v. Cabaret Biotech Ltd.

Background

This declaratory-judgment action concerned the interpretation of several agreements governing royalty and other payments connected to patent rights. An earlier Inter-Institutional Agreement required The Regents of the University of California to commercialize certain patent rights and pay Cell Genesys half of the net revenues. Cell Genesys later became part of BioSante Pharmaceuticals, and ANI later succeeded to BioSante’s rights.

In 2012, BioSante, The Regents, and Dr. Zelig Eshhar entered into a Tripartite Agreement covering shared patent rights. The agreement gave Eshhar responsibility for commercialization and licensing. It required Eshhar, and later Cabaret Biotech Ltd. as his successor, to pay The Regents 25% of net revenues. The Regents was required to retain half of that amount and pay the other half to BioSante, and later to ANI.

Cabaret entered into a licensing agreement with Kite Pharma, Inc. Kite later was acquired by Gilead Sciences, Inc.; the record was unclear about whether Gilead assumed Kite’s obligations. After Gilead questioned the enforceability of Cabaret’s patent rights, payments were made under protest. Cabaret sought arrangements that would protect it if payments were later recovered. ANI did not agree to such an arrangement.

In March 2019, Cabaret and The Regents entered into a Common Interest and Escrow Agreement. It required Cabaret to place in escrow the amounts owed to The Regents under the Tripartite Agreement from payments made under protest. In April 2019, The Regents and ANI entered into an Assignment and Assumption Agreement assigning to ANI the right to receive directly from Cabaret ANI’s half of the payments due to The Regents. The Tripartite Agreement did not address whether its rights could be assigned.

Claims and Arguments

ANI sought declarations that it was entitled to receive its share of payments under the Tripartite Agreement directly from Cabaret and that the Escrow Agreement could not defeat that entitlement. Cabaret sought the opposite declarations, arguing that the assignment was invalid because it changed the Tripartite Agreement and that the escrow arrangement was consistent with that agreement.

ANI moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). The court applied the same standard used for a motion to dismiss for failure to state a legally sufficient claim, considering the pleadings and documents attached to them. The court stated that the relevant facts were not disputed.

Court’s Analysis

The court applied California law to the Tripartite Agreement and Assignment Agreement. It explained that a contract generally cannot be changed without the consent of all contracting parties. The Tripartite Agreement bound ANI, Cabaret, and The Regents, required Cabaret to make payments to The Regents, and required The Regents to pay half of its receipts to ANI.

Because ANI was not a party to the Escrow Agreement, the court held that the Escrow Agreement could not diminish ANI’s rights under the Tripartite Agreement. The court stated that neither Cabaret nor The Regents had authority to limit ANI’s rights through the Escrow Agreement. The court acknowledged that the escrow arrangement might modify the portion of net revenues payable for The Regents’ own benefit, but it could not modify the portion payable to The Regents for ANI’s benefit.

The court also held that the Assignment Agreement was enforceable and entitled ANI to direct payment from Cabaret. Under California law, contract rights generally may be assigned unless the assignment materially prejudices the non-assigning party. The court rejected Cabaret’s argument that the assignment materially prejudiced it by depriving it of protections under the Escrow Agreement. Those protections could not alter ANI’s preexisting rights, and the Tripartite Agreement contained no provision barring assignment.

The court further explained that an obligor’s consent is ordinarily unnecessary for an assignment, particularly when the obligation is simply to pay money. It concluded that changing the person to whom Cabaret had to make payment did not materially change Cabaret’s duty or increase its burden or risk under the contract. The court also rejected Cabaret’s arguments based on the fact that other stakeholders had accepted protective arrangements and that ANI allegedly sought unrelated concessions.

Disposition

The court granted ANI’s motion for judgment on the pleadings. It directed the Clerk to close the motion and enter judgment for ANI, with costs, and stated that the case was closed. Judge Alvin K. Hellerstein signed and issued the order.