Summary
The Delaware Supreme Court affirmed the Court of Chancery’s judgment concerning whether a $50 million milestone payment was triggered under an acquisition agreement. The majority held that the agreement’s reference to a “Hematologic Cancer Indication” was ambiguous and that the regulatory approval obtained for a genetically defined subset of CLL patients did not satisfy the contractual milestone condition. Justice Seitz, joined by Justice Traynor, dissented, concluding that the approval was for CLL, a disease listed in the agreement, and that the payment was therefore due.
Topics
Practice areas
Questions Presented
- Whether the contractual term “Hematologic Cancer Indication” was ambiguous and could be interpreted using parol evidence.
- Whether regulatory approval for first-line treatment of a genetically defined subset of CLL patients satisfied the contractual condition for the third milestone payment.
- Whether the Court of Chancery’s interpretation and factual findings were sufficiently supported by the record to warrant affirmance on appeal.
Holdings
- The Court of Chancery properly interpreted the ambiguous term “Hematologic Cancer Indication” to refer to a disease listed in Schedule 1.1 and concluded that the approval obtained for only a small subset of CLL patients did not trigger the milestone payment.
- When a trial judge’s factual findings and resolution of a contractual ambiguity are properly supported by the record, the appellate court must defer to those findings and may affirm on that basis.
Key quotations
“Although there was evidence on the other side of the question, the Court of Chancery’s decision was supported by sufficient record evidence, and resolved the contractual ambiguity in a commercially sensible manner.” (2)
“In this situation, it is our duty to defer to a trial judge’s properly supported fact findings and we thus affirm.” (2)
“With this context in mind, we therefore AFFIRM the Court of Chancery’s March 24, 2017 Final Judgment and Order on the basis of its detailed March 15, 2017 decision.” (4)
Factual background
Calistoga Pharmaceuticals was acquired by Gilead under an agreement providing for a $50 million milestone payment upon regulatory approval of CAL-101 as a first-line treatment for a Hematologic Cancer Indication. The European regulatory approval covered first-line treatment of CLL patients with a 17p deletion or TP53 mutation, a genetically defined group comprising approximately 5% to 15% of the overall CLL population. The Court of Chancery determined that the agreement required approval for CLL as an entire disease class, rather than approval limited to that subset, and held that no milestone payment was due.
Procedural history
The Court of Chancery found the contractual term “Hematologic Cancer Indication” ambiguous, considered parol evidence, interpreted the term to mean a disease listed in Schedule 1.1, and concluded that the regulatory approval obtained for a genetically defined subset of CLL patients did not trigger the milestone payment. The Delaware Supreme Court affirmed the Court of Chancery’s March 24, 2017 final judgment and order on the basis of the Chancellor’s detailed March 15, 2017 decision.