Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_12-cv-02915/USCOURTS-casd-3_12-cv-02915-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332pr Diversity-Petition for Removal

---

1

12-cv-2915-JM-JLB

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

ADVANCED TARGETING SYSTEMS, 

INC., a corporation,

Plaintiff,

v.

ADVANCED PAIN REMEDIES, INC., a 

corporation; CATO RESEARCH LTD, a 

corporation; and DOES 1-50, inclusive,

Defendants.

Case No.: 12-cv-2915-JM-JLB

ORDER: 

(1) GRANTING DEFENDANTS’ 

MOTION TO ENFORCE THE 

PARTIES’ SETTLEMENT 

AGREEMENT AND STIPULATION 

FOR JUDGMENT; and

(2) DIRECTING THE CLERK OF 

COURT TO ENTER JUDGMENT

[ECF No. 88]

Presently before the Court is a Motion to Enforce the Parties’ Settlement Agreement 

and Stipulation for Judgment filed by Defendants, ADVANCED PAIN REMEDIES, INC. 

(“APR”) and CATO RESEARCH LTD, against Plaintiff, Advanced Targeting Systems, 

Inc. (ECF No. 88.) Defendants seek a court order to enforce the Stipulated Judgment 

Amount set forth in the Parties’ Settlement Agreement. (See id.) For the following reasons, 

Defendants’ motion (ECF No. 88) is GRANTED.

I. BACKGROUND

In this diversity action, the underlying dispute arose from a 2008 contract between 

biotechnology companies regarding the development of Substance P-Saporin (“SPCase 3:12-cv-02915-JM-JLB Document 92 Filed 03/07/16 PageID.<pageID> Page 1 of 13
2

12-cv-2915-JM-JLB

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

SAP”), a pain-killing conjugate developed by Plaintiff ATS.

1

 (ECF No. 1-2 at 1, ¶1.) 

Specifically, in January 2008, to “assist in its ultimate goal of obtaining FDA approval,”

Plaintiff entered into a Development and License Agreement (“DLA”) with Defendant 

APR that imposed continuing obligations on both parties. (ECF No. 1-2 at 6-7, ¶¶15, 

17.) Plaintiff “ATS was responsible for producing SP-SAP for use in clinical trials.” 

(ECF No. 1-2 at 6, ¶17.) APR would prepare and prosecute an investigational new drug 

application (“IND Application”), which is the regulatory filing necessary to obtain FDA

approval of the sale and use of a new drug for humans, for SP-SAP. (ECF No. 1-2 at 6-7, 

¶¶15, 17; ECF Nos. 23 at 3; 88-1 at 2, 89 at 7.)

The DLA also granted APR an exclusive license to market and sell SP-SAP, which 

would terminate after three years if APR did not file the IND Application. (ECF No. 1-2 

at 1, 7, ¶¶1, 18; ECF No. 89-1, Declaration of Denise Higgins (“Higgins Decl.”) at 2.)2 

Further, Plaintiff ATS “filed four patents which were subject to the license.” (ECF No. 

63 at ¶44; see also ECF No. 1-2 at ¶11.) APR and Cato alleged in their Counterclaim 

that:

The DLA provides with respect to these patents that (a) Advanced Targeting 

shall confer with APR regarding plans to secure expanded patent protection 

for Product. The Parties shall seek to agree on the patent strategy to be 

followed in expanding such protection; and (b) Advanced Targeting shall 

keep APR informed with regard to patent application and maintenance 

processes. Advanced Targeting shall deliver to APR copies of all patent 

 

1 Plaintiff alleged that “SP-SAP eliminates the spinal cord neurons that send chronic pain signals to the 

brain, while allowing ordinary pain sensitivity to function normally. The ability to separate chronic pain 

transmission from ordinary pain transmission, and the removal of chronic pain transmission, created 

great excitement in the scientific community, and ATS received patent protection for SP-SAP and 

second generation reagents.” (ECF No. 1-2 at 5, ¶11.) “ATS’s ultimate goal is to have SP-SAP 

approved as a chronic pain treatment option for humans.” (ECF No. 1-2 at 5, ¶12.)

2 As to this term of the DLA, Defendants APR and Cato Research pled that the license would expire “if 

APR did not by that date either file an IND with the FDA (or foreign equivalent) or seek approval from 

an Institutional Review Board for initiation of human testing, provided that the January 15, 2011 

deadline would be extended if the IND filing or seeking of approval from the Institutional Review Board 

did not occur for reasons outside the reasonable control of APR.” (ECF No. 63 at 5, ¶19.)

Case 3:12-cv-02915-JM-JLB Document 92 Filed 03/07/16 PageID.<pageID> Page 2 of 13
3

12-cv-2915-JM-JLB

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

applications, amendments, related correspondence, and other related matters;

and (c) Advanced Targeting would cooperate fully in the preparation, filing, 

prosecution and maintenance of any patent rights with respect to Product.

(ECF No. 63 at ¶45.) APR and Cato alleged that ATS materially breached its obligations 

with respect to the four patents. (Id. at ¶46.) Both sides alleged that the other side was 

responsible for wasting irreplaceable, valuable time under the patent lifespan. (ECF No. 

1-2 at ¶58; ECF No. 63 at ¶31.)

Pursuant to the DLA, APR began to take the steps necessary to obtain FDA

approval for SP-SAP. (ECF No. 23 at 3.) Cato Research Ltd. was retained and drafted a 

successful $3 million National Institutes of Health (“NIH”) grant application, which APR 

and Cato Research Ltd. alleged was to fund required development under the DLA.

3

 (ECF 

No. 63 at ¶¶3, 30.)

Both sides asserted their own claims or counter-claims against one another, with 

each side asserting that the other side wronged it and failed to honor the DLA. (ECF 

Nos. 1-2, 23, 63.)4 For example, the parties disputed whether Defendant APR 

intentionally prepared and filed an unacceptable “sham” IND Application with the FDA

so as to improperly extend the life of APR’s exclusive license to market and sell SP-SAP 

under the DLA. (ECF Nos. 1-2 at 2, ¶2; ECF No. 63 at ¶¶20-23, 32-43.) APR alleged

that Plaintiff ATS sabotaged APR’s efforts to prepare the IND Application by making

representations that “were intended to deceive APR such that it would not have adequate 

time to prepare and file an IND, the consequence of which would be termination of the 

 

3 APR represented that it was an affiliate of Cato Research Ltd. (ECF No. 63 at 5, ¶18) and a partiallyowned subsidiary of Cato Holding Company (ECF No. 36-1 at 6).

4 Plaintiff’s claims included: (1) breach of contract; (2) breach of the implied covenant of good faith and 

fair dealing; (3) declaratory relief; and (4) fraud. Defendants’ counterclaims included: (1) declaratory 

judgment by APR against ATS; (2) breach of written contract by APR against ATS; (3) unfair and 

deceptive trade practices by APR against ATS; (4) unjust enrichment by APR against ATS; 

(5) fraudulent inducement by Cato and APR against ATS; (6) breach of oral contract by Cato and APR 

against ATS; and (7) unjust enrichment by Cato against ATS.

Case 3:12-cv-02915-JM-JLB Document 92 Filed 03/07/16 PageID.<pageID> Page 3 of 13
4

12-cv-2915-JM-JLB

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

license.” (ECF No. 63 at ¶50.) APR and Cato also claimed that ATS breached its duties 

to properly use and put to work the $3 million in NIH grant funds. (ECF No. 63 at ¶¶31, 

85, 89.)

On June 18, 2014 the parties participated in full-day Early Neutral Evaluation 

Conference (“ENE”).5 (ECF No. 72.) With the help of Magistrate Judge Jill L. 

Burkhardt, the parties reached a settlement at that ENE and put the material terms of the 

settlement on the record. (Id.) The parties memorialized their settlement in a written 

settlement agreement, but requested and received the Court’s assistance with certain 

language concerning confidentiality and the definition of gross revenue subject to 

revenue sharing. (ECF Nos. 79, 80.) Thereafter, on August 28, 2014, the parties signed

the settlement agreement (hereinafter, the “Settlement Agreement”). (ECF No. 88-1 at 3; 

ECF No. 88-2 at 2 (L. Sutton Decl.).)

At the time the parties operated under the DLA, the parties shared the ultimate goal 

of obtaining FDA approval (or otherwise realizing revenue from SP-SAP). In the course 

of settling this dispute, Plaintiff ATS negotiated to have the right to pursue that goal, 

whereas Defendants agreed to release its rights to SP-SAP, but negotiated the right to 

share in revenue from SP-SAP. (See ECF No. 88-3.)

The Settlement Agreement required Plaintiff to pay Defendants a “one-time 

payment of one million one-hundred and fifty thousand dollars ($1,150,000)” by June 18, 

2015. (ECF No. 88-3 at 7.) The Settlement Agreement also provided for Plaintiff to 

make Royalty payments to Defendants out of any revenue generated from the SP-SAP. 

The Settlement Agreement specifically provided that if Plaintiff were to fail to make the 

one-time payment of $1,150,000 by June 18, 2015, “Defendants shall be entitled to a 

stipulated judgment against [Plaintiff] and in favor of Defendants in the amount of two 

 

5 Prior to the ENE, the parties also participated in private mediation before a JAMS mediator in San 

Diego. (ECF No. 1-2 at ¶34.)

Case 3:12-cv-02915-JM-JLB Document 92 Filed 03/07/16 PageID.<pageID> Page 4 of 13
5

12-cv-2915-JM-JLB

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

million dollars ($2,000,000).” (Id.) “[H]owever, if the Stipulated Judgment is obtained 

and paid in full, seven-hundred thousand dollars ($700,000) of the Stipulated Judgment

shall be creditable against Royalty payment obligations.” (ECF No. 88-3 at 7.) Under 

the terms of the Settlement Agreement, securing a stipulated judgment in the amount of 

two million dollars ($2,000,000) constitutes Defendants’ sole remedy for breach of the

Settlement Agreement. (Id.)

Defendants filed this instant motion with the Court on August 28, 2015, after 

Plaintiff failed to pay the one-time payment by June 18, 2015. (ECF Nos. 88, 88-1 at 4.) 

Plaintiff filed an Opposition to Defendants’ motion on September 15, 2015. (ECF No. 

89.) Defendants filed their reply on September 22, 2015. (ECF No. 90.) 

II. LEGAL STANDARD

A federal court has jurisdiction to enforce a settlement agreement in a dismissed 

case where, as here, the dismissal order states that the court has retained jurisdiction to 

enforce the settlement agreement. Hagestad v. Tragesser, 49 F.3d 1430, 1433 (9th Cir.

1995) (citing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 381 (1994)); see 

also Wackeen v. Malis, 97 Cal. App. 4th 429, 440 (2002). In such cases, “a breach of the

[settlement] agreement would be a violation of the [dismissal] order, and ancillary 

jurisdiction to enforce the agreement would therefore exist.” Kokkonen, 511 U.S. at 381. 

Further, where the parties placed the material terms of their settlement agreement on the 

court record, there is “no need for an evidentiary hearing on whether an agreement 

existed, or what its terms were,” and the court is empowered to summarily enforce the 

agreement. Doi v. Halekulani Corp., 276 F.3d 1131, 1139 (9th Cir. 2002).

6

/ / /

 

6 Plaintiff’s argues that the Court may not summarily enforce the settlement agreement because material 

facts concerning a term of the settlement agreement are in dispute. (ECF No. 89 at 15.) However, 

Plaintiff fails to demonstrate a term of the settlement is in fact in dispute. Thus, summary enforcement 

is appropriate.

Case 3:12-cv-02915-JM-JLB Document 92 Filed 03/07/16 PageID.<pageID> Page 5 of 13
6

12-cv-2915-JM-JLB

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

III. DISCUSSION

It is undisputed Plaintiff breached the Settlement Agreement when it failed to 

make the one-time payment of $1,150,000 owed to Defendants by June 18, 2015. As 

such, Defendants seeks to enforce Article 4.1 of the Settlement Agreement wherein the 

parties agreed to a “stipulated judgment” against Plaintiff in the amount of $2,000,000 in 

the event that Plaintiff failed to make the one-time payment of $1,150,000. (ECF No. 88-

1 at 6; ECF No. 88-3 at 7.) Plaintiff argues that the Court cannot enforce the stipulated 

judgment amount set forth in Article 4.1 because it constitutes an unlawful penalty 

clause.

The parties agree that California law applies. As recently explained by the 

California Court of Appeal:

Whether a contractual provision is an unenforceable penalty is determined 

by the trial court, not the jury. As a result, the issue has been described as a 

question of law. However, the validity of a provision alleged to be an 

unlawful penalty “is not really a classic question of law, but is one of fact 

that, because of its character, is nevertheless committed to judicial 

determination.” Thus, a trial court decides, in light of all the facts, including 

the whole instrument, whether the provision in question is an unlawful 

penalty. 

Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc., 232 Cal. App. 4th 1332, 

1354-55 (2015) (citations omitted).

In the context of a non-consumer contract, the current test to assess the validity of 

a provision alleged to be an unlawful penalty is set forth in California Civil Code 

§ 1671(b) and provides that “a provision in a contract liquidating the damages for the 

breach of the contract is valid unless the party seeking to invalidate the provision 

establishes that the provision was unreasonable under the circumstances existing at the 

time the contract was made.” See Californians for Population Stabilization v. HewlettPackard Co., 58 Cal. App. 4th 273, 288 (1997), overruled on other grounds in Cortez v. 

Purolator Air Filtration Prods. Co., 23 Cal. 4th 163, 175-77 (2000). “This ‘new’ test 

Case 3:12-cv-02915-JM-JLB Document 92 Filed 03/07/16 PageID.<pageID> Page 6 of 13
7

12-cv-2915-JM-JLB

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

places the burden on the party challenging the liquidated damages provision and

eliminates the requirement to show that fixing actual damages was impracticable or

extremely difficult.” Id. As explained by the Law Revision Commission Comments:

In the cases where subdivision (b) applies, the burden of proof on the issue 

of reasonableness is on the party seeking to invalidate the liquidated 

damages provision. The subdivision limits the circumstances that may be 

taken into account in the determination of reasonableness to those in 

existence “at the time the contract was made.” . . . [S]ubdivision (b) gives 

the parties considerable leeway in determining the damages for breach. All 

the circumstances existing at the time of the making of the contract are 

considered, including the relationship that the damages provided in the 

contract bear to the range of harm that reasonably could be anticipated at the 

time of the making of the contract. Other relevant considerations in the 

determination of whether the amount of liquidated damages is so high or so 

low as to be unreasonable include . . . the relative equality of the bargaining 

power of the parties, whether the parties were represented by lawyers at the 

time the contract was made, the anticipation of the parties that proof of 

actual damages would be costly or inconvenient, the difficulty of proving 

causation and foreseeability, and whether the liquidated damages provision

is included in a form contract.

Law Revis’n Comm’n Comments, 1977 Amendment.

Applying § 1671(b), the amount of a stipulated judgment (arising from a breach of 

contract) relative to the missed payment amount is not in itself dispositive of the issue of 

whether the stipulated judgment is an unenforceable penalty. There is no per se rule with 

respect to the reasonableness of any given stipulated judgment amount or as to the 

proportionality of the stipulated judgment amount to the debt. Courts have enforced 

stipulated judgments that represent a greater percentage of the missed payment amount 

than is at issue here. See, e.g., Burns v. Romero Gen. Constr., No. 13-cv-05649, 2015 

WL 4498197, at *4 (N.D. Cal. July 23, 2015) (finding enforceable $49,278 of liquidated 

damages for a principal amount of $93,415.11 (52.8%)); Florez v. Yim, No. B255766, 

2015 WL 1524416, at *1 (Cal. Ct. App. Apr. 2, 2015) (enforcing settlement agreement 

that provided that, “if respondents did not pay the agreed-upon settlement amount, 

Case 3:12-cv-02915-JM-JLB Document 92 Filed 03/07/16 PageID.<pageID> Page 7 of 13
8

12-cv-2915-JM-JLB

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

appellants could enter a stipulated judgment for $300,000” (71.43% increase))

7

; Weber, 

Lipshie & Co. v. Christian, 52 Cal. App. 4th 645, 656 (1997) (enforcing liquidated 

damages of twice the actual damages). Thus, the Court turns to each of Plaintiff’s 

arguments as to why the stipulated judgment amount in this case is unreasonable.

The settlement agreement at issue here is a non-consumer contract. As such, under 

the plain language of California Civil Code § 1671(b), Plaintiff ATS bears the burden of 

proof to demonstrate that the stipulated judgment provision of its settlement agreement 

with Defendants is unenforceable because it reflects an amount of liquidated damages 

that is so high as to be “unreasonable under the circumstances existing at the time the 

contract was made.” Cal. Civ. Code § 1671(b). To meet its burden of proof, Plaintiff

points to (1) the absence of actual damages resulting from Plaintiff’s failure to make the 

one-time payment (ECF No. 89-1, ¶13), (2) the fact that Defendants never advised 

Plaintiff ATS that the $2,000,000 stipulated judgment amount reflected their “reasonable 

attempt to determine the actual amount of ‘time value of money’ damages that might 

arise should ATS not timely make the $1,150,000.00 Settlement Payment” (id., ¶10), and 

(3) the fact that the stipulated judgment provision increases the debt owed by Plaintiff by 

$850,000 if ATS makes the settlement payment even one day late. 

First, Plaintiff’s focus on the absence of evidence showing Defendants’ actual

damages resulting from Plaintiff’s failure to make the one-time payment is misplaced. 

Under section 1671(b) and consistent case authority, a liquidated damages provision may 

be unreasonable, and hence unenforceable, if the party seeking to invalidate the provision 

establishes the amount of liquidated damages “bears no reasonable relationship to the 

range of actual damages that the parties could have anticipated would flow from a 

breach.’” Jade Fashion & Co. v. Harkham Indus., Inc., 229 Cal. App. 4th 635, 646 

(2014) (quoting Ridgley v. Topa Thrift & Loan Ass’n, 17 Cal. 4th 970, 977 (1998) 

 

7 Although unpublished, Florez v. Yim still is an example of California law on this issue.

Case 3:12-cv-02915-JM-JLB Document 92 Filed 03/07/16 PageID.<pageID> Page 8 of 13
9

12-cv-2915-JM-JLB

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

(emphasis added)); Greentree Fin. Grp., Inc. v. Execute Sports, Inc., 163 Cal. App. 4th 

495, 497 (2008). Thus, “the validity of the liquidated damages provision depends upon 

its reasonableness at the time the contract was made and not as it appears in retrospect. 

Accordingly, ‘the amount of damages actually suffered has no bearing on the validity of 

the liquidated damages provision.’” Edwards v. Symbolic Int’l, Inc., No. 07cv1826-JMA, 

2009 WL 1178662, at *5 (S.D. Cal. Apr. 30, 2009) (emphasis in original).

Second, the Court is not persuaded by Plaintiff’s evidence that Defendants never 

advised Plaintiff that the $2,000,000 stipulated judgment amount reflected their 

“reasonable attempt to determine the actual amount of ‘time value of money’ damages 

that might arise should ATS not timely make the $1,150,000.00 Settlement Payment.” 

(ECF No. 89-1, ¶10.) “No actual negotiation regarding the amount of the liquidated 

damages need take place.” Edwards, 2009 WL 1178662, at *6. Instead, treatises and 

courts analyzing whether liquidated damages reflect the range of harm that reasonably 

could be anticipated at the time the parties contracted focus more on the reasonableness 

of “the amount of liquidated damages, and not the process by which that amount was 

derived.” Util. Consumers’ Action Network, Inc. v. AT&T Broadband of S. Cal., Inc., 

135 Cal. App. 4th 1023, 1034 (2006).

Further, the process by which the parties determined the stipulated damages 

provision supports, rather than undermines, a conclusion that the amount is reasonable 

under the circumstances existing at the time the contract was made.

8

 Plaintiff’s 

bargaining power in negotiating and signing the settlement agreement was at least equal 

to that of Defendants. Plaintiff was represented at the settlement conference by 

 

8

See Law Revis’n Comm’n Comments, 1977 Amendment (“Other relevant considerations . . . 

include . . . the relative equality of the bargaining power of the parties, whether the parties were 

represented by lawyers at the time the contract was made, the anticipation of the parties that proof of 

actual damages would be costly or inconvenient, the difficulty of proving causation and foreseeability, 

and whether the liquidated damages provision is included in a form contract”).

Case 3:12-cv-02915-JM-JLB Document 92 Filed 03/07/16 PageID.<pageID> Page 9 of 13
10

12-cv-2915-JM-JLB

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

sophisticated counsel of its choice.9 The settlement agreement was not a form contract; 

rather, it was specifically negotiated by the parties’ principals and their attorneys in the 

context of a full-day ENE that was presided over by a neutral magistrate judge.

10

 (ECF 

No. 72.) The stipulated judgment amount was one of the material terms of the settlement 

that the parties put on the record at the conclusion of the ENE and included in the written 

Settlement Agreement months later. (ECF Nos. 79, 80, 88-1 at 3; ECF No. 88-2 at 2 (L. 

Sutton Decl.).) Thus, in light of the circumstances at the time of contracting, the Court 

attaches little significance to Plaintiff’s evidence that Defendants did not convey to 

Plaintiff their calculation of the relationship between the stipulated judgment amount and 

the amount Defendants could anticipate would flow from Plaintiff’s breach of the 

Settlement Agreement.

Third and finally, the fact that the stipulated judgment provision increases the debt 

owed by Plaintiff by $850,000 if ATS makes the settlement payment even one day late is 

not dispositive here. Plaintiff argues the $850,000 “bears no ‘proportional relation’ to 

any conceivable damages that could possibly be caused by the failure to make the 

$1,150,000.00 Settlement Payment on time.” (ECF No. 89 at 5-6, 8-14.) Again, the 

Court is unpersuaded.

Plaintiff’s argument improperly attempts to shift the evidentiary burden onto 

Defendants and relies on the incorrect premise that its obligation to Defendants is 

“simply the payment of money,” such that “interest on the past due amount” constitutes 

 

9 Plaintiff’s counsel, Richard Blaylock, specializes in intellectual property litigation and corporate 

transactional counseling. (ECF No. 90-3, Ex. B at 1.) Mr. Blaylock also works at Pillsbury, a “fullservice law firm” with “multidisciplinary teams” trained to understand its clients’ objectives and “bring 

a 360-degre perspective to complex business and legal issues.” (ECF No. 90-2, Ex. A at 2.) Pillsbury’s 

website states that its litigators have received “top-tier, national recognition from various ranking 

agencies, including Chambers USA and US News & World Report.” (Id.) Plaintiff’s counsel had the 

skill, experience, and legal support necessary to advise Plaintiff as to whether the stipulated judgment 

provision was reasonable under the circumstances existing at the time the settlement was made.

10 Prior to the ENE, the parties also participated in private mediation before a JAMS mediator in San 

Diego. (ECF No. 1-2 at ¶34.)

Case 3:12-cv-02915-JM-JLB Document 92 Filed 03/07/16 PageID.<pageID> Page 10 of 13
11

12-cv-2915-JM-JLB

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

the full extent of the harm that reasonably could have been anticipated at the time of the 

making of the Settlement Agreement. (See ECF No. 89 at 11.) Having presided over the 

settlement negotiations, the Court disagrees. This case is distinguishable from the cases 

cited by Plaintiff, such as Greentree where the parties “simply selected the amount 

Greentree had claimed as damages in the underlying lawsuit, plus prejudgment interest, 

attorney fees, and costs.” Greentree, 163 Cal. App. 4th at 497.

Here, the record supports the conclusion that the parties reasonably could have 

anticipated at the time of contracting that proof of Defendants’ actual damages from 

Plaintiff’s breach of the Settlement Agreement would be costly or inconvenient, and that 

proof of Plaintiff’s actions or omissions causing foreseeable damages to Defendants 

would be difficult to show. The settlement negotiated by the parties was complex and 

assessing potential damages from Plaintiff’s breach would have been difficult. This is 

especially true considering the parties’ roles in the DLA and FDA approval process, the 

uncertainty and expense of the FDA approval process, the prosecution and maintenance 

of any patent rights with respect to product SP-SAP, and the absence of settlement terms 

requiring Plaintiff to demonstrate to Defendants its good faith efforts to generate revenue 

in connection with SP-SAP. Defendants could have anticipated at the time of contracting 

that Plaintiff’s failure to make the one-time payment would signal a significant change in 

Plaintiff’s likelihood of ultimately achieving revenue from SP-SAP.

The difference between the stipulated judgment amount and the one-time payment 

is $850,000. (ECF No. 88-3, Ex. A at 7.) Plaintiff asserts that the entire $850,000 

difference constitutes a “penalty.” (ECF No. 89 at 9.) Plaintiff’s assertion is 

unpersuasive because it fails to recognize the underlying complexities of the settlement 

agreement and the interplay between the stipulated judgment and the revenue sharing 

obligation. In the instant case, the amount of liquidated damages is mitigated by the term 

in the Settlement Agreement which provides that, of the $2,000,000 collected as part of 

the stipulated judgment, Plaintiff can offset $700,000 from the first $700,000 in revenue 

Case 3:12-cv-02915-JM-JLB Document 92 Filed 03/07/16 PageID.<pageID> Page 11 of 13
12

12-cv-2915-JM-JLB

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

sharing payments due to Defendants under the Settlement Agreement. (ECF No. 88-3 at 

7 (Article 4.2).) Thus, this mitigating provision anticipates approximately $150,000 to be 

the net amount that Plaintiff would lose by virtue of its breach of the one-time payment 

provision, assuming diligent and successful efforts in the monetization of the patents at 

issue. Plaintiff does not argue this amount to be unreasonable.

In the absence of a showing to the contrary by the party bearing the burden of 

proof, section 1671(b) directs courts to presume a reasonable relationship between a 

liquidated damages provision and the circumstances existing at the time the contract was 

made. Here, Defendants and their attorneys could have anticipated at the time of 

contracting that substantial attorney time, and therefore fees, would be necessary to try to

recover a judgment and settlement funds from Plaintiff if it breached its payment 

obligation. Defendants could have also considered that substantial loss-of-patent-life and 

lost future profit damages would continue to grow as they pursued a judgment and 

settlement funds from Plaintiff. Indeed, Defendants have now been seeking settlement 

funds from Plaintiff for over eight months. 

In sum, the Court concludes that Plaintiff fails to present sufficient evidence to 

meet its burden to show the stipulated judgment provision was unreasonable under the 

circumstances existing at the time the contract was made. Therefore, the Court concludes 

that the Stipulated Judgment Provision within the Settlement Agreement is reasonable 

and enforceable.11

 

11 Plaintiff had multiple opportunities during the settlement negotiation to raise concerns regarding the 

stipulated judgment amount. Instead, Plaintiff chose to raise this issue for the first time after it breached 

the Settlement Agreement and after it became “apparent that [Plaintiff] would not be able to make the 

full $1,150,000 Settlement Payment on or before June 18, 2015.” (ECF No. 89-1, Higgins Decl. at 3.) 

Plaintiff fails to meet its burden of proof, and thus, the Court declines to alter the Parties’ signed 

agreement simply because Plaintiff has become dissatisfied with the agreement. See DVD Copy Control 

Ass’n, Inc. v. Kaleidescape, Inc., 176 Cal. App. 4th 697, 725 (2009) (“The court may not remake the 

bargain to the advantage of one party for no reason other than that the party has become dissatisfied with 

the agreement.”).

Case 3:12-cv-02915-JM-JLB Document 92 Filed 03/07/16 PageID.<pageID> Page 12 of 13
13

12-cv-2915-JM-JLB

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

III. CONCLUSION

Defendants’ Motion to Enforce the Parties’ Settlement Agreement and Stipulation 

for Judgment (ECF No. 88) is hereby GRANTED. 

The Clerk of Court is instructed to please enter the parties’ stipulated JUDGMENT 

in favor of Defendants and against Plaintiff in the amount of $2,000,000.00.

This case is closed.

IT IS SO ORDERED.

Dated: March 7, 2016

 

 

Case 3:12-cv-02915-JM-JLB Document 92 Filed 03/07/16 PageID.<pageID> Page 13 of 13