Court Opinion

ID: 4217483
Source: CourtListenerOpinion
Date Created: 2017-11-02 20:07:36.611943+00
Date Added: 2024-06-11T14:42:19.921239
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

BIOVERIS CORPORATION,                     )
                                          )
             Plaintiff,                   )
                                          )
   v.                                     ) C.A. No. 8692-VCMR
                                          )
MESO SCALE DIAGNOSTICS,                   )
LLC,                                      )
                                          )
   and                                    )
                                          )
MESO SCALE TECHNOLOGIES,                  )
LLC                                       )
                                          )
             Defendants.

                            MEMORANDUM OPINION

                          Date Submitted: September 6, 2017
                           Date Decided: November 2, 2017

Joel Friedlander and Christopher M. Foulds, FRIEDLANDER & GORRIS, P.A.,
Wilmington, Delaware; Nancy J. Sennett, James T. McKeown, and Eric L. Maassen,
FOLEY & LARNDER LLP, Milwaukee, Wisconsin; Attorneys for Plaintiff
BioVeris Corporation.

David E. Ross and Bradley R. Aronstam, ROSS ARONSTAM & MORITZ LLP,
Wilmington, Delaware; Mark C. Hansen, Michael J. Guzman, Joshua Hafenbrack,
and Hilary P. Gerzhoy, KELLOGG, HANSEN, TODD, FIGEL & FREDERICK,
P.L.L.C., Washington, District of Columbia; Attorneys for Defendants Meso Scale
Diagnostics, LLC, and Meso Scale Technologies, LLC.

MONTGOMERY-REEVES, Vice Chancellor.
      In 1995, Meso Scale Technologies and IGEN International, which became

BioVeris Corporation, formed a joint venture, Meso Scale Diagnostics, to pursue the

development of electrochemiluminescence technology. The companies worked

together for almost a decade before their relationship began to deteriorate. The first

decade of their relationship was marked by collaboration, but the second decade was

marked by litigation. In 2004, BioVeris filed two lawsuits against Meso Scale

Diagnostics and Meso Scale Technologies. They settled both disagreements that

same year. The settlement effectuated the sale of BioVeris’s thirty-one percent

interest in Meso Scale Diagnostics to Meso Scale Technologies. Unfortunately, that

was not the end of the disputes that would arise between BioVeris and Meso Scale

Technologies.

      The case presently before me arose in 2013 from the 2004 settlement

agreement. In essence, this dispute is about the final purchase price for BioVeris’s

thirty-one percent interest in Meso Scale Diagnostics. BioVeris argues that Meso

Scale Technologies failed to pay the entire purchase price and breached the 2004

settlement agreement when it stopped payments in 2010. Conversely, Meso Scale

Technologies argues that, in 2008, BioVeris released Meso Scale Technologies for

the money allegedly owed. In the alternative, Meso Scale Technologies argues that

BioVeris’s claims are barred by laches.

                                          1
      I grant Defendants’ Motion for Summary Judgment because I hold that

BioVeris’s claims are barred by laches. BioVeris failed to brings its claims within

the analogous three-year statute of limitations for breach of contract claims, and

there are no unusual conditions or exceptional circumstances to justify disregarding

the analogous statute of limitations.

I.    BACKGROUND
      The facts in this opinion are drawn from Plaintiff’s Verified Complaint (the

“Complaint”), Plaintiff’s Corrected Brief in Opposition to Defendants’ Motion for

Summary Judgement, the exhibits Plaintiff submitted with the affidavit of

Christopher P. Quinn, and the exhibits Defendants submitted with the affidavit of

David E. Ross.

      A.     Parties and Relevant Non-Parties
      Plaintiff BioVeris Corporation (“BioVeris”) is a Delaware corporation with

its principal place of business in Indianapolis, Indiana.

      Defendant Meso Scale Diagnostics, LLC (“Diagnostics”) and Defendant

Meso Scale Technologies, LLC (“Meso”) are Delaware limited liability companies

with their principal places of business in Rockville, Maryland. Diagnostics was

organized as a joint venture between IGEN International, Inc. (“IGEN”) and Meso.

      IGEN was a California corporation and the predecessor in interest to

BioVeris.

                                           2
        Non-party Jacob Wohlstadtler, a resident of Maryland, is the sole member of

Meso.

        B.     Facts

               1.      The joint venture
        On November 30, 1995, Diagnostics, Meso, and BioVeris (then IGEN)

entered into a joint venture agreement, which the parties overhauled in a 2001

amendment (the “JVA”).1 Several sections of the JVA are relevant to the present

litigation.

        First, the JVA provides a mandatory procedure to resolve disputes arising

under the JVA. Section 7.2 provides a pre-arbitration, twenty-day negotiations

period followed by binding arbitration in Washington, D.C. under the auspices of

the American Arbitration Association.2          Section 7.2 allows the tolling of any

applicable statute of limitations for the duration of negotiations and arbitration as

long as the arbitration is filed within sixty days of the end of good faith negotiations.3

        Second, the JVA provides buy-out procedures in Section 8.5, granting

Defendants the right to purchase all of BioVeris’s interest if the joint venture is

1
        Ross Aff. Ex. 1, at 1.
2
        Id. at Ex. 3, at 22-23.
3
        Id. at 24.

                                            3
terminated.4 Section 8.5.3(a) allows Defendants jointly to purchase all of BioVeris’s

interest “by paying to [BioVeris] the purchase price determined pursuant to Section

8.5.4 (the ‘Purchase Price’) in accordance with this Section 8.5.3.”5 Section 8.5.3(b)

outlines the process by which Defendants would “make payments to [BioVeris] with

respect to the unpaid amount of the Purchase Price, plus accrued interest . . . .” 6 The

formula for quarterly payments is: “(i) five percent (5.00%) of the amount of

[Diagnostic] Net Sales (as defined below), and (ii) twenty percent (20%) of the net

proceeds realized by [Diagnostics] from the sale of its debt or equity securities in

any third party financing . . . .”7 Section 8.5.4(a) states for purposes of Section 8.5.3:

             [T]he Purchase Price shall be equal to (i) the fair market
             value of the [BioVeris] Interests at the time, as determined
             in accordance with Section 8.5.4.(b) and either Section
             8.5.4.(c) or Section 8.5.4.(d), as applicable (“FMV”),
             reduced by (ii) the highest of the discount factors set forth
             in Section 8.5.4.(e) that are applicable.8

4
      Id. at 26-33; Id. at Ex. 1, at 15-16.
5
      Id. at Ex. 2, at 26.
6
      Id. at 27.
7
      Id.
8
      Id. at 29.

                                              4
Section 8.5.5 requires BioVeris to remove its designee from the Board of Managers

if Defendants exercise their right to buy BioVeris’s interest under 8.5.3.9

      Finally, the JVA includes a provision for special remedies if Defendants

default on the Purchase Price. Section 8.5.6(a) allows BioVeris to put a designee

back on the Board of Managers if Meso defaults on its obligation to pay the Purchase

Price and the default is not cured within thirty days of receipt of written notice of

default from BioVeris.10 Section 8.5.6(b) automatically adds an amount equal to

fifteen percent of the unpaid Purchase Price to the outstanding principle amount in

the event of default.11

             2.     The joint venture terminates in 2004
      On February 13, 2004, Roche Holdings AG12 acquired IGEN and converted

IGEN to BioVeris.13 This transaction terminated the joint venture between IGEN

and Meso, and on February 29, BioVeris sent termination notices to Meso.14 On

April 29, Meso sent a letter notifying BioVeris that Defendants were invoking

9
      Id. at 32.
10
      Id.
11
      Id.
12
      Roche Holdings AG is not a party to this case nor involved in any relevant way.
13
      Quinn Aff. Ex. 39, at 3.
14
      Id. at Exs. 42-43.

                                          5
Section 8.5.3 of the JVA.15 The April 29 letter also requested that BioVeris remove

its designee from the Board of Managers under Section 8.5.5 “as soon as possible.”16

      On June 14, BioVeris filed two lawsuits in the Court of Chancery related to

Meso’s attempt to trigger Section 8.5.5, as well as allegations that Meso’s sole

member, Wohlstadter, breached his fiduciary duties to Diagnostics.17

             3.        The 2004 Settlement Agreement
      On August 12, 2004, BioVeris, Diagnostics, Meso, and Wohlstadter entered

into an agreement to resolve both outstanding lawsuits in the Court of Chancery (the

“Settlement Agreement”). The recitals of the Settlement Agreement read, in part:

                   WHEREAS, there is an action currently pending in
             the Court of Chancery of the State of Delaware in and for
             New Castle County (the “Delaware Court”) styled
             BioVeris Corp. v. Wohlstadter, C.A. No. 507-N (the “§18-
             110 Action”), brought by BioVeris against Jacob N.
             Wohlstadter (“Wohlstadter”), Meso Scale Technologies
             LLC (“[Meso]”), and [Diagnostic] (collectively, the
             “Defendants”).

                   WHEREAS, there is an action currently pending in
             the Delaware Court styled BioVeris Corp. v. Wohlstadter,
             C.A. No. 572-N (the “Fiduciary Duty Action” collectively
             with the §18-110 Action, the “Actions”), brought by
             BioVeris against Defendants.

15
      Id. at Ex. 44.
16
      Id.
17
      Id. at Exs. 48-49.

                                         6
                    WHEREAS, the Actions, in part, arose out of the
             Joint Venture Agreement (the “JVA”) dated November
             20, 1995 (as amended August 15, 2001) by and among
             [Diagnostic], [Meso] and BioVeris (as successor in
             interest to IGEN International, Inc.) and the [Diagnostic]
             Limited Liability Company Agreement (“[Diagnostic]
             LLC Agreement”) dated November 30, 1995 (as amended
             August 15, 2001); and

                    WHEREAS, the parties have reached an agreement,
             set forth herein (the “Agreement”), providing for
             settlement of the Actions, on the terms, and subject to the
             conditions set forth below (the “Settlement”).18

      The Settlement Agreement includes several other provisions relevant to this

litigation. Section 1 confirms the parties’ agreement to proceed with the buyout

process originally set forth in Sections 8.5.3 and 8.5.4 of the JVA. 19 Section 17

amends the Purchase Price in Section 8.5.4 of the JVA to include the Pro Rata Rent

Share20 through August 31, 2005.21 Section 17 also includes the parties’ agreement

to “reconcile the actual accrued Pro Rata Rent Share (as defined in the subleases)

18
      Id. at Ex. 50, at 1.
19
      Id.
20
      “[A]s defined in the subleases between BioVeris and [Diagnostics].” Id. at 7.
21
      Id.

                                           7
and make any necessary adjustments to the Purchase Price (as defined in the JVA)

arising from such reconciliations.”22

      The parties agreed to a dispute resolution scheme for any disputes arising out

of the Settlement Agreement. Sections 23 and 24 outline an audit procedure as the

sole remedy for disputes related to the calculation of the five percent payments under

Section 8.5.3.23 All other disputes “arising out of or relating in any way to this

Agreement or the Settlement” must be litigated in the courts of Delaware.24 Further,

the prevailing party in any action to enforce the Settlement Agreement may recover

costs and attorneys’ fees.25

      Finally, the Settlement Agreement includes an entire agreement and savings

clause (Section 45) which reads:

              This Agreement constitutes the entire agreement among
              the parties with respect to the subject matter hereof, and
              supersedes all prior or contemporaneous oral or written
              agreements, understandings or representations. Unless
              otherwise modified herein, the written agreements
              between or among the parties, including without
              limitation, the JVA, the [Diagnostic] LLC Agreement and

22
      Id.
23
      Id. at 8.
24
      Id. at 12.
25
      Id. at 13.

                                          8
             the License Agreement, shall remain in full force and
             effect.26

      After executing the Settlement Agreement, Meso bought out BioVeris’s

thirty-one percent interest in Diagnostics.27 The parties conducted three separate

appraisals under Section 3 of the Settlement Agreement and determined the value of

BioVeris’s interest to be $9.89 million.28 On November 2, 2004, BioVeris sent

Diagnostics a predicted total for the Pro Rata Rent Share through August 31, 2005

equal to $2,337,243.29 This figure includes the actual Pro Rata Rent Share for March

to September 2004 and the projected Pro Rata Rent share for October 2004 to August

2005.30 The parties do not dispute that they never finished the reconciliation process

required by Section 17 of the Settlement Agreement.31

      In 2005 and 2006, Meso drew down the $2 million prepayment credit

provided as part of BioVeris’s seller financing.32 Starting in 2007, Meso made

26
      Id. at 14.
27
      Opp’n Br. 9.
28
      Id.
29
      Ross Aff. Ex. 6, at BioVeris 0006617.
30
      Opp’n Br. 9.
31
      Oral Arg. Tr. 38.
32
      Ross Aff. Ex. 26, at MSD-0011092-93.

                                          9
quarterly payments equal to five percent of its quarterly net sales.33 A standard letter

setting out Diagnostics’s Net Sales for the previous quarter as well as the five percent

amount being wired to BioVeris accompanied each quarterly payment.34 The letters

read, “[t]he payment due to BioVeris under Section 8.5.3 of the Joint Venture

Agreement is $[amount being wired].”35

             4.        The 2010 Letter
      On May 28, 2010, Meso sent BioVeris its quarterly report and payments.36

The accompanying letter (the “2010 Letter”) deviated from the form letters Meso

had sent previously and read in relevant part, “[t]he payment due to BioVeris under

Section 8.5.3 of the Joint Venture Agreement is $430,670, which represents the

remaining balance due on the Purchase Price (including accrued interest).”37 Meso

made no further payments towards the Purchase Price after May 28, 2010.38

33
      Id.
34
      The letters are exactly the same except for the dates and dollar amounts of the
      quarterly payments. See, e.g., id. at Exs. 27-28.
35
      Id.
36
      Id. at Ex. 26.
37
      Id.
38
      Opp’n Br. 21.

                                          10
BioVeris did not communicate with Meso about the 2010 Letter until April 30,

2013.39

            5.     The 2013 communications
      On April 30, 2013, BioVeris sent a “Notice of Default and Demand for

Payment of Amount Due for Purchase of Diagnostics Member Interests and Request

for Acknowledgement.”40 On May 17, Meso responded to the April 30 letter

asserting that “no further amounts are due in respect of the Purchase Price.”41 Meso

further stated that any disputes would need to be resolved under Sections 23 and 24

of the Settlement Agreement.42 On May 28, BioVeris purported to open “the 20-day

period of negotiations pursuant to Section 7.2 of the Joint Venture Agreement, as

amended.”43 On June 12, Meso responded, reiterating its view that it owed nothing

further under the Purchase Price and that the Settlement Agreement governed any

disputes about the Purchase Price.44

39
      Ross Aff. Ex. 31; Ross Aff. Ex. 30, at 52.
40
      Ross Aff. Ex. 32, at MSD-0002215.
41
      Id. at MSD-0002217.
42
      Id. at MSD-0002215.
43
      Id. at MSD-0002219.
44
      Id. at MSD-0002221.

                                           11
             6.    The present litigation
      BioVeris filed its Complaint on June 28, 2013. Meso filed its first Motion for

Summary Judgment on January 22, 2016, before discovery concluded. I heard oral

argument on May 5, 2016, and denied the motion on August 5, 2016. Meso filed its

second Motion for Summary Judgment on April 10, 2017. I heard oral argument on

that motion on September 6, 2017.

II.   ANALYSIS
      Plaintiff argues Defendants failed to pay the full Purchase Price owed under

the Settlement Agreement. Plaintiff seeks monetary damages, a contractual penalty

for defaulting on the Purchase Price, appointment of a representative to Diagnostic’s

board, and attorneys’ fees for this action. Defendants argue that there is no need for

a trial because the undisputed facts show that the claims are barred by laches, 45 and

thus, summary judgment should be granted.

      Summary judgment will be “granted if the pleadings, depositions, answers to

interrogatories and admissions on file, together with the affidavits, show that there

is no genuine issue as to any material fact and that the moving party is entitled to a

45
      Defendants argue, in the alternative, that BioVeris’s claims were released by a 2008
      agreement between the parties, but I need not address this argument as the claim is
      barred by laches.

                                           12
judgment as a matter of law.”46 When considering a motion for summary judgment,

the evidence and the inferences drawn from the evidence are to be viewed in the

light most favorable to the nonmoving party.47

      In order to grant summary judgment based on laches, I must determine which

analogous statute of limitations applies. “[T]he limitations of actions applicable in

a court of law are not controlling in equity,” 48 because, in equity, the defense of

laches applies.49 Laches is an equitable doctrine “rooted in the maxim that equity

aids the vigilant, not those who slumber on their rights.”50 When an equitable claim

seeks legal relief or a legal claim seeks equitable relief, the court will apply the

statute of limitations by analogy and bar the claims outside the limitations period

“absent tolling or extraordinary circumstances.”51 When a plaintiff brings a “legal

action [seeking legal relief] in the Court of Chancery as a result of ancillary

jurisdiction or some other jurisdictional source,” that plaintiff “should not be placed

46
      Twin Bridges L.P. v. Draper, 2007 WL 2744609, at *8 (Del. Ch. Sept. 14, 2007)
      (citing Ct. Ch. R. 56(c)).
47
      Judah v. Del. Trust Co., 378 A.2d 624, 632 (Del. 1977).
48
      Reid v. Spazio, 970 A.2d 176, 183 (Del. 2009).
49
      IAC/InterActiveCorp v. O’Brien, 26 A.3d 174, 177 (Del. 2011).
50
      Kraft v. WisdomTree Invs., Inc., 145 A.3d 969, 974 (Del. Ch. 2016).
51
      Id. at 983.

                                          13
in a potentially better position to seek to avoid a statute of limitation than if she had

filed in a Delaware court of law by invoking the more flexible doctrine of laches.”52

Thus, to avoid allowing a plaintiff to benefit from the more flexible doctrine of

laches the statute of limitations logically should apply by analogy strictly and the

traditional laches analysis should not apply.53 Delaware law recognizes an exception

to this general rule and will not apply the analogous statute of limitations if there are

“unusual conditions or extraordinary circumstances” that justify not applying it.54

      Ultimately, whether laches, through an analogous statute of limitations, bars

he claims in this case depends on this Court’s interpretation of the agreements

between the parties. “[T]he threshold inquiry when presented with a contract dispute

on a motion for summary judgment is whether the contract is ambiguous.” 55

Ambiguity exists “when the provisions in controversy are reasonably or fairly

susceptible of different interpretations or may have two or more different

meanings.”56 “Ambiguity does not exist simply because the parties disagree about

52
      Id.
53
      Id. at 982.
54
      Levey v. Brownstone Asset Mgmt., LP, 76 A.3d 764, 770 (Del. 2013).
55
      United Rentals, Inc. v. RAM Hldgs., Inc., 937 A.2d 810, 830 (Del. Ch. 2007).
56
      Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1196
      (Del. 1992).

                                           14
what the contract means.”57 The moving party will be entitled to summary judgment

where it can show its construction of the contract “is the only reasonable

interpretation.”58

      When interpreting a contract, the court will give effect to the parties’ intent

based on the parties’ words and the plain meaning of those words.59 “If parties

introduce conflicting interpretations of a term, but one interpretation better comports

with the remaining contents of the document or gives effect to all the words in

dispute,”60 then, “as a matter of law and without resorting to extrinsic evidence, [the

court may] resolve the meaning of the disputed term in favor of the superior

interpretation.”61

      A.     BioVeris’s Claims for Damages and Attorneys’ Fees Are Barred by
             Laches
       BioVeris does not dispute that only two options for seeking relief exist under

the Settlement Agreement.62 First, Section 23 provides an audit procedure “focused

57
      United Rentals, Inc., 937 A.2d at 830.
58
      Id.; see also Rhone-Poulenc, 616 A.2d at 1198.
59
      Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del. 2006).
60
      Wills v. Morris, 1998 WL 842325, at *2 (Del. Ch. Nov. 6, 1998).
61
      Id.
62
      Oral Arg. Tr. 44-48.

                                          15
solely upon the payments under Section 8.5.3 of the JVA . . ., in order to verify the

amounts of payments made by [Diagnostic] to BioVeris.”63 Second, Section 34

states:

                 The parties agree that any dispute arising out of or relating
                 in any way to this Agreement or the Settlement shall not
                 be litigated or otherwise pursued in any forum or venue
                 other than the courts of Delaware, and the parties
                 expressly waive any right to demand a jury trial as to any
                 such dispute.64

          For the reasons set forth below, BioVeris’s claims for the remainder of the

Purchase Price and attorneys’ fees arise under the Settlement Agreement, must have

been sought in the courts of Delaware; these claims now are barred by laches because

they were not brought within the analogous statute of limitations and no tolling

doctrines, unusual conditions, or extraordinary circumstances exist.

                 1.     The Settlement Agreement, and not the JVA, governs
                        BioVeris’s claims for the remainder of the Purchase Price
                        and attorneys’ fees
          BioVeris seeks two forms of relief under the Settlement Agreement. First,

BioVeris asks for an award for damages in the amount of $3,088,777 plus interest

as the balance of the Purchase Price Meso allegedly owes under Section 1 of the

63
          Quinn Aff. Ex. 50, at 8.
64
          Id. at 12-13 (emphasis added).

                                              16
Settlement Agreement.65 Paragraph 23 of BioVeris’s Complaint reads, “[p]ursuant

to Section 1 of the Settlement Agreement, Meso agreed to pay BioVeris the Purchase

Price in accordance with the terms of the Settlement Agreement and the provisions

of the JVA incorporated by reference therein.”66 As BioVeris explains in its

Complaint, relevant sections of the JVA were incorporated into the Settlement

Agreement.67 Nothing, however, indicates that any incorporation happened in

reverse, which would be necessary for BioVeris to enforce its right to the Purchase

Price agreed to in the Settlement Agreement under the JVA. Thus, the Settlement

Agreement—not the JVA—provides the remedy for the unpaid portion of the

Purchase Price, and any such remedy must have been pursued in the courts of

Delaware pursuant to Section 34 of the Settlement Agreement.68

65
      Compl. ¶¶ 5-6.
66
      Id. ¶ 23.
67
      Id. ¶ 2.
68
      Meso argues the dispute is governed by Section 23 of the Settlement Agreement,
      which would have required BioVeris to seek an audit within one year of the breach.
      Opening Br. 33-34. I need not address this argument because BioVeris’s claim is
      barred by laches even under the more generous three-year statute of limitations for
      breach of contract claims.

                                          17
      Second, BioVeris asks for attorneys’ fees and costs under Section 40 of the

Settlement Agreement.69 Section 40 reads, “[t]he prevailing party in any action to

enforce this Agreement shall be entitled to recover, in addition to any other relief

awarded, court costs and reasonable attorney fees and costs incurred in connection

with such action.”70 The JVA does not include any provision for recovering

attorneys’ fees. There can be no question then that any action seeking this relief

must be brought under Section 34 of the Settlement Agreement in the courts of

Delaware.

      BioVeris has failed to show how the JVA’s dispute resolution procedures

would govern the claims arising from the Settlement Agreement. 71 This is because

the Settlement Agreement “constitutes the entire agreement among the parties with

respect to the subject matter hereof, and supersedes all prior or contemporaneous

69
      Compl. 8.
70
      Quinn Aff. Ex. 50, at 13.
71
      Even if there was some argument for applying the JVA, Section 7.2 of the JVA and
      Section 34 of the Settlement Agreement are irreconcilable, as both sections are
      exclusive as to the dispute resolution procedure. Because there is no way for a party
      to comply with both dispute resolution provisions the later in time provision, Section
      34, supersedes the earlier provision, Section 7.2. Country Life Homes, Inc. v.
      Shaffer, 2007 WL 333075, at *5 (Del. Ch. Jan. 31, 2007) (“The new contract, as a
      general matter, will control over the old contract with respect to the same subject
      matter to the extent that the new contract is inconsistent with the old contract or if
      the parties expressly agreed that the new contract would supersede the old one.”).

                                            18
oral or written agreements, understandings or representations.”72 Under the

Settlement Agreement, BioVeris was required to pursue these claims in the courts

of Delaware.73        As the Settlement Agreement’s dispute resolution procedure

governed the claims for the remainder of the Purchase Price and attorneys’ fees,

these claims had to be brought in the courts of Delaware and are subject to

Delaware’s three year statute of limitations for breach of contract claims.74

             2.       The 2010 Letter constituted a total breach of the Settlement
                      Agreement which triggered the analogous statute of
                      limitations
      The parties intensely disagree about when the statute of limitations for the

breach of contract claim began to run.75 The parties also ardently contest whether

the Settlement Agreement constitutes an installment contract. I need not determine

whether the Settlement Agreement is an installment contract because Meso’s actions

72
      Quinn Aff. Ex. 50, at 14 (emphasis added).
73
      Id. at 12-13.
74
      10 Del. C. § 8106(a).
75
      While statutes of limitations are not binding in courts of equity, when a plaintiff
      seeks a legal remedy for a legal claim in the Court of Chancery the statute of
      limitations will apply by analogy strictly to avoid placing the plaintiff in a better
      position than she would be had she gone to a Delaware court of law. Kraft v.
      WisdomTree Invs., Inc., 145 A.3d 969, 975 (Del. Ch. 2016). I address this issue in
      greater detail below.

                                           19
constituted a total breach, which I hold triggers the statute of limitations even for an

installment contract.

      Delaware law is silent as to whether there can be a total breach of an

installment contract such that the non-breaching party can recover on the entire

contract, and the statute of limitations begins to run for the entire claim as opposed

to just for the one installment. BioVeris relies on Walpole v. Walls76 to argue that

this Court should hold the breach of each installment of a contract gives rise to a

new cause of action and triggers the limitations period anew as to that particular

installment.77 In Walpole, the plaintiff and defendant were joint owners of a

convenience store.78 In 1989, they entered into an oral agreement whereby the

defendant acquired the plaintiff’s ownership interest in the joint business by agreeing

to pay off the plaintiff’s second mortgage.79       In January 1998, the defendant

informed the plaintiff he was going to stop making payments on the mortgage.80 The

76
      2003 WL 22931330 (Del. Ct. C.P. July 8, 2003).
77
      Opp’n Br. 30-31.
78
      Walpole, 2003 WL 22931330, at *1.
79
      Id.
80
      Id.

                                          20
defendant made his last payment on April 28, 1998.81 The plaintiff resumed

payments on December 2, 1998.82 On October 28, 2001, the plaintiff filed suit to

recover the payments he made on the mortgage after December 1998.83 The Court

of Common Pleas recited the Delaware rule, “limitations on lawsuits for breach of

installment payment contracts accrue with respect to each installment only from the

time the installment becomes due, unless the obligee has the option to declare the

whole sum due and exercises that option . . . .”84 Relying on this rule, and the fact

that the parties did not include an acceleration clause in the oral agreement, the Court

of Common Pleas allowed the plaintiff to recover all payments of the mortgage that

would have been due within three years of filing suit.85

      But the present case is distinguishable from Walpole.           In Walpole, the

defendant told the plaintiff he was going to stop payments on the second mortgage.86

81
      Id.
82
      Id.
83
      Id.
84
      Id. at *2 (citing Worrel v. Farmers Bank of the State of Del., 430 A.2d 469, 476
      (Del. 1981)).
85
      Id.
86
      Id. at *1, *2.

                                          21
That statement was an anticipatory repudiation.87 In the case of an anticipatory

repudiation the non-breaching party is entitled to a choice of several different types

of remedy, including waiting until performance is due to pursue its claims. 88 But,

an anticipatory repudiation can be retracted before the non-repudiating party has

materially changed position in reliance on the repudiation.89              In Walpole, the

defendant continued to pay the mortgage after he told the plaintiff he was going to

stop payments, but before the plaintiff started making the payments himself.90 By

87
      23 Williston on Contracts § 63:28 (4th ed.) (defining an anticipatory breach as “a
      repudiation of the obligations of a contract by a party to it before the time has come
      for performance on his or her part”).
88
      23 Williston on Contracts § 63:33 (4th ed.) (“Unquestionably the great weight of
      authority, whether rightly or wrongly decided, accepts the doctrine of breach by
      anticipatory repudiation or ‘anticipatory breach.’ Under the doctrine, as accepted
      by the courts, the rights of a party to a bilateral contract which has been
      anticipatorily breached should be: 1. to rescind the contract altogether, and if any
      performance has already been rendered by the injured party, to recover its value on
      principles of quasi contract; 2. to elect to treat the repudiation as a breach, either by
      bringing suit promptly, or by making some change of position; or 3. to await the
      time for performance of the contract and bring suit after that time has arrived.”)
89
      Carteret Bancorp, Inc. v. Home Grp., Inc., 1988 WL 3010, at *6 (Del. Ch. Jan. 13,
      1988) (“Thus, when effective, a retraction has the effect of nullifying a repudiation
      and placing the matter in its original position. . . . If the promise to whom a
      repudiation has been given relies upon it in any respect to his detriment . . . the
      promisor will lose the power to retract the repudiation for, in such circumstances,
      his retraction cannot really return the situation to its prior status.”).
90
      See Walpole, 2003 WL 22931330, at *1 (The defendant told the plaintiff “he would
      no longer make payments” in January 1998, but the defendant made his last payment
      on April 28, 1998.).

                                             22
continuing to pay the mortgage the defendant effectively retracted his repudiation.91

Thus, the defendant’s failure to pay after April 1998 was a breach of an installment

contract by non-performance, which is consistent with the court’s statement of the

Delaware rule, other Delaware case law cited by BioVeris,92 and the court’s holding

in Walpole.

      The present case, however, presents a scenario on which Delaware law largely

remains silent. In contrast to a bare anticipatory repudiation, significant authority

supports the conclusion that a repudiation coupled with simultaneous non-

performance gives rise to an action for total breach, allowing the non-breaching

party to bring an action for the entire contract price and triggering the statute of

limitations as to the total amount due under the contract.

      Section 243(2) of Restatement (Second) Contracts states “[e]xcept as stated

in Subsection (3), a breach by non-performance accompanied by or followed by a

91
      See Restatement (Second) of Contracts § 256 cmt. b (1981) (“It is not necessary for
      the repudiator to use words in order to retract his statement.”).
92
      Worrel v. Farmers Bank of the State of Del., 430 A.2d 469, 471 (Del. 1981)
      (discussing a breach by non-payment with no repudiation); Knutkowski v. Cross,
      2014 WL 5106095, at *1 (Del. Ch. Oct. 13, 2014) (discussing a breach by non-
      payment with no repudiation).

                                          23
repudiation gives rise to a claim for damages for total breach.”93 Williston on

Contracts states,

             In the case of a strictly anticipatory breach, it is true, there
             is often at least a theoretical possibility that the repudiator
             can and will effectively withdraw the repudiation so that
             the contract can be performed, but after a material present
             breach, any attempt to withdrawal by the wrongdoer
             would be ineffectual. . . . The idea that the injured party
             may elect not to call a breach something that is a breach .
             . . is not logically defensible, whatever authorities may be
             cited in its favor.94

      Corbin on Contracts states a similar view:

             Suppose next that the contract requires performance in
             installments or continuously for some period and that there
             has been such a partial failure of performance as justifies
             immediate action for a partial breach. If this partial breach
             is accompanied by repudiation of the contractual
             obligation such repudiation is anticipatory with respect to
             the performances that are not yet due. In most cases, the
             repudiator is now regarded as having committed a “total”
             breach, justifying immediate action for the remedies
             appropriate thereto. . . . The non-performance plus the
             repudiation constitute one and only one cause of action.95

93
      Restatement (Second) of Contracts § 243(2) (1981).
94
      31 Williston on Contracts § 79:19 (4th ed.).
95
      9 Arthur Linton Corbin Corbin on Contracts § 954 (interim ed. 2002) (citations
      omitted); 10 John E. Murray, Jr. Corbin on Contracts § 53.12 (Joseph M. Perillo,
      ed., rev. ed. 2014) (citations omitted).

                                           24
      The Court of Appeals for the Third Circuit summarized the above section from

Corbin on Contracts stating, “[a] single infraction of contractual obligations, such

as a missed payment, is insufficient to constitute a ‘total breach’ of the agreement

unless accompanied by an anticipatory repudiation of future performance.”96 I agree

with this authority and hold that a present breach of an executory contract coupled

with a repudiation of the remainder of the contract constitutes a total breach, which

allows the non-breaching party to recover everything owed under the contract and

triggers the statute of limitations for the entire contract.

      Under BioVeris’s own theory of the case, Defendants breached the Settlement

Agreement on May 28, 2010 when they sent payment for less than half of the amount

required under Section 8.5.3.        The breach was apparent on the face of the

accompanying letter, which reported aggregate Diagnostics Net Sales of

$17,452,585.97 Under Section 8.5.3, the quarterly payment to BioVeris should be

96
      R.C. Beeson, Inc. v. Coca Cola Co., 337 F. App’x 241, 244 (3d Cir. 2009) (emphasis
      added) (citations omitted) (citing 9 Corbin on Contracts § 954). The Third Circuit
      was sitting in diversity and applying New Jersey law in R.C. Beeson. Prior to the
      extension of New Jersey law in R.C. Beeson, New Jersey and Delaware law were
      consistent on this topic. Therefore, extending Delaware law in the same manner is
      consistent with the weight of authority and supported by the R.C. Beeson decision.
97
      Ross Aff. Ex. 26, at MSD-0011090.

                                           25
five percent, or $872,629. Instead, Meso paid $430,670, a clear breach of the parties’

agreement.98

      The parties, however, disagree on whether Meso repudiated the remainder of

the contract with the 2010 Letter. The policy rationale for recognizing the doctrine

of anticipatory breach was articulated by Chancellor Allen in Carteret Bancorp, Inc.

v. Home Group, Inc.99 “If it is clear that the promisor intends not to perform his

promise, there seems little reason to force the parties to wait to have their rights and

obligations determined while markets rise and fall and practical adjustments to the

new state of affairs could be made.”100 To find that there has been an anticipatory

repudiation, “a promisor must give an ‘unequivocal statement’ that is ‘positive and

unconditional.’”101

      BioVeris relies on Veloric v. J.G. Wentworth Inc.102 to argue that the 2010

Letter was not a repudiation. This reliance is erroneous. In Veloric, this Court

examined four statements the plaintiffs argued constituted anticipatory repudiations.

98
      Id.
99
      Carteret Bancorp, Inc., 1988 WL 3010, at *5.
100
      Id.
101
      Veloric v. J.G. Wentworth Inc., 2014 WL 4639217, at *15 (Del. Ch. Sept. 8, 2014).
102
      Veloric, 2014 WL 4639217.

                                          26
This Court found that each was only an expression of belief or doubt and, therefore,

not unequivocal.103     Meso’s statement in the 2010 Letter that the payment

“represents the remaining balance due on the Purchase Price (including accrued

interest)” is positive, unequivocal, and unconditional. It made clear that Meso would

be sending no further payments, which BioVeris believed, and still believes, it was

owed. Furthermore, BioVeris’s internal documents show that BioVeris understood

the 2010 Letter was a repudiation of the Settlement Agreement.104 There can be no

question, then, that the 2010 letter constituted an anticipatory repudiation.

      BioVeris argues that even if the 2010 Letter and payment were a breach and

repudiation, the exception in Restatement Section 243(3) applies. Section 243(3)

provides:

             Where at the time of the breach the only remaining duties
             of performance are those of the party in breach and are for
             the payment of money in installments not related to one
             another, his breach by non-performance as to less than the
             whole whether or not accompanied or followed by a
             repudiation, does not give rise to a claim for damages for
             total breach.105

103
      Id. at *15 (stating, for example, “[p]laintiffs allege that defendant Rodriguez told
      Veloric in a November 1, 2012 email … that Wentworth ‘had no assets with which
      it could pay Veloric and Goodman, and that [d]efendants believed no other
      Wentworth entity owed any obligation relating to the TRA’”).
104
      Ross Aff. Exs. 133, 134 (“[Diagnostics] is claiming they have paid the note in full.
      Currently being handled by lawyers.”).
105
      Restatement (Second) of Contracts § 243(3) (1981).

                                           27
      It is uncontested that the parties’ never completed the Pro Rata Rent Share

reconciliation process as required under the Settlement Agreement.106 Instead,

BioVeris argues that Meso prevented the reconciliation, and therefore, the exception

from Section 243(3) should still apply.107 BioVeris cites no legal authority to support

this assertion.108 BioVeris also argues that absent a reconciliation, an estimate for

the Pro Rata Rent Share would be used to reconcile the Pro Rata Rent Share.109

Again, BioVeris offers no authority or facts to support this assertion.110 The bottom

line then is that BioVeris concedes that the parties never came to an agreement on

the Pro Rata Rent Share reconciliation as required by the Settlement Agreement.

      Because the parties still have not fulfilled their duty to reconcile the Pro Rata

Rent Share, the Settlement Agreement is still executory and does not fall under the

106
      Oral Arg. Tr. 37-38.
107
      Id. at 38.
108
      Id.
109
      Oral Arg. Tr. 68.
110
      Because BioVeris has offered no facts to support its arguments or assertions it has
      not created a triable issue of material fact that would preclude the granting of
      summary judgement. Leitstein v. Hirt, 2006 WL 2986999, at *1 (Del. Ch. Oct. 12,
      2006) (quoting McGowan v. Ferro, 859 A.2d 1012, 1027 (Del. Ch. 2004), aff’d 873
A.2d 1099 (Del. 2005)) (“The non-moving party does bear one burden: ‘In the face
      of a properly supported motion for summary judgment, the nonmoving party must
      produce evidence that creates a triable issue of fact or suffer the entry of summary
      judgment against it.’”).

                                           28
exception in Section 243(3). Meso’s 2010 Letter with accompanying payment was

a present breach accompanied by an anticipatory repudiation, constituting a total

breach. A total breach triggers the statute of limitations, which in Delaware is three

years for a breach of contract claim, for the entire contract.111 BioVeris, therefore,

had until May 28, 2013 to bring its action for breach of contract in the courts of

Delaware.

             3.        No tolling doctrines, unusual conditions, or extraordinary
                       circumstances apply in this case
      A plaintiff with a legal claim seeking legal damages in the Court of Chancery

cannot avoid the statute of limitations that would apply in a Delaware court of law

by invoking the equitable doctrine of laches.112 To avoid allowing a plaintiff to

benefit from the more flexible doctrine of laches “an analogous limitations period

should operate as a strong presumption of laches for cases in this Court’s concurrent

jurisdiction, which generally will obviate the need for a traditional laches inquiry.

The presumption is rebuttable, however, either by a recognized tolling doctrine or

by the presence of extraordinary circumstances.”113        BioVeris seeks monetary

damages for a breach of contract and, thus, has brought a legal claim seeking legal

111
      10 Del. C. § 8106(a).
112
      Kraft v. WisdomTree Invs., Inc., 145 A.3d 969, 976 (Del. Ch. 2016).
113
      Id. at 982-83.

                                          29
relief. Therefore, there is a strong presumption laches applies unless BioVeris rebuts

the presumption by showing unusual conditions or exceptional circumstances under

IAC/InterActiveCorp v. O’Brien.114

      In O’Brien, the Delaware Supreme Court affirmed the following factors to

determine whether “unusual conditions or exceptional circumstances” justify

ignoring the analogous statute of limitations:

             1) whether the plaintiff had been pursuing his claim,
             through litigation or otherwise, before the statute of
             limitations expired; 2) whether the delay in filing suit was
             attributable to a material and unforeseeable change in the
             parties’ personal or financial circumstances; 3) whether
             the delay in filing suit was attributable to a legal
             determination in another jurisdiction; 4) the extent to
             which the defendant was aware of, or participated in, any
             prior proceedings; and 5) whether, at the time the litigation
             was filed, there was a bona fide dispute as to the validity
             of the claim.115

      BioVeris argues unusual conditions or exceptional circumstances exist here

because BioVeris pursued its claims under the dispute resolution provisions of the

JVA before the statute of limitations expired, and the parties had a bona fide dispute

about the claims at the time this litigation was filed.116 Additionally, BioVeris

114
      26 A.3d 174 (Del. 2011).
115
      Id. at 178.
116
      Opp’n Br. 45-46

                                          30
contends that initiating negotiations under Section 7.2 of the JVA tolled the statute

of limitations. None of these arguments save these claims.

      Instituting negotiations on May 28, 2013 was not sufficient pursuit of the

claims to qualify under the first O’Brien factor. BioVeris points to two cases where

Delaware courts have examined the pursuit of claims under O’Brien: Levey v.

Brownstone Asset Management, LP and Perlman v. Vox Media, Inc.117 In Levey, the

Delaware Supreme Court found the plaintiff had sufficiently pursued his claim “by

litigation or otherwise.”118 That case involved significant confusion over the proper

forum for the dispute, but the plaintiff diligently attempted to find the correct forum.

Before the running of the analogous statute of limitations, the plaintiff had taken the

following steps: First, he raised his claims as compulsory counterclaims to a lawsuit

in the Southern District of New York.119 Then, he sent a letter to the defendants

demanding payment.120 Finally, he requested the Southern District of New York

compel arbitration before the National Association of Securities Dealers (“NASD”)

117
      76 A.3d 764 (Del. 2013); 2015 WL 5724838 (Del. Ch. Sept. 30, 2015).
118
      76 A.3d 764, 771 (Del. 2013).
119
      Id. at 766.
120
      Id. at 766-67.

                                          31
and stay the case pending the outcome of the arbitartion.121 The Southern District

of New York granted the motion to compel and ordered the case closed. 122 The

plaintiff complied with the order and filed a demand for arbitration with the Financial

Industry Regulatory Authority, Inc. (“FINRA”), the successor to NASD.123 The

FINRA arbitration panel found that they did not have jurisdiction over the

defendants and “advised [the plaintiff] to pursue his claims ‘in another forum which

does have jurisdiction’ over the [d]efendants.”124 It was only after the arbitration

was dismissed that the plaintiff filed in Delaware, but by that point the analogous

statute of limitations had run.125

      In Perlman, this Court found the plaintiffs had pursued their claims when they

“spent time, effort, and money calling websites around the world that were

republishing the 2012 Articles, bring[ing] to their attention the defamation therein

and requesting they remove the links.”126 This Court found the plaintiff’s diligence

121
      Id. at 767.
122
      Id.
123
      Id.
124
      Id.
125
      Id.
126
      2015 WL 5724838, at *13 (Del. Ch. Sept. 30, 2015).

                                          32
to qualify under the first O’Brien factor for two reasons. First, the pursuit was “self-

help rather than litigation,” which showed the plaintiffs were trying to avoid

“running to the courthouse” and were attempting to deal with the dispute without

burdening any court.127 Second, the plaintiffs argued that they did not understand

the true extent of their harm until after the statute of limitations had run.128

      In contrast to these two examples, BioVeris merely sent two letters before the

statute of limitations expired. The April 30, 2013 letter demanded payment two

years and eleven months after Meso stopped payments. The May 28, 2013 letter

purported to open negotiations under the JVA, obviously disregarding the parties’

forum selection clause in the Settlement Agreement. These two letters do not rise

anywhere near the same level of diligence exercised by the plaintiffs in Levey and

Pearlman, and they do not show BioVeris was pursuing the claim before the statute

of limitations expired. This is especially true since there was a clear forum selection

clause in the Settlement Agreement.129

127
      Id.
128
      Id.
129
      Quinn Aff. Ex. 50, at 12-13.

                                           33
      A party cannot rely on a suit knowingly filed in the wrong forum as a basis

for avoiding the application of laches.130 Section 7.2 of the JVA allowed for the

tolling of the statute of limitations until the dispute was resolved under the arbitration

agreement as long as an arbitration request was filed within sixty days of the

termination of the good faith negotiations.131 But, Section 7.2 of the JVA does not

apply to these claims. Therefore, the tolling provision in Section 7.2 does not save

these claims. BioVeris chose to disregard Section 34 of the Settlement Agreement,

which required it to bring these claims in Delaware courts. Thus, BioVeris cannot

save its claims with the arbitration action under the first O’Brien factor.132 If

BioVeris wished to pursue claims under the Settlement Agreement and the JVA,

then it should have filed two different actions in the two appropriate forums.

      BioVeris makes no argument, nor advances any facts, as to the second, third,

or fourth O’Brien factors. As for the fifth O’Brien factor, BioVeris argues that there

was a bona fide dispute at the time the suit was filed. The mere existence of a bona

fide dispute at the time the suit was filed does not justify a finding of extraordinary

circumstances when the weight of the other factors cuts against such a finding. Thus,

130
      Carlyle Inv. Mgmt. L.L.C. v. Nat’l Indus. Gp. (Hldg.), 2012 WL 4847089, at *11
      (Del. Ch. Oct. 11, 2012), aff’d 67 A.3d 373 (Del. 2013); CMS Inv. Hldg., LLC v.
      Castle, 2016 WL 4411328, at *3 (Del. Ch. Aug. 19, 2016).
131
      Ross Aff. Ex. 2, at 24.
132
      Id.

                                           34
I do not find that extraordinary circumstances existed such that laches should not bar

the claim.

      Because there was no extraordinary circumstance nor tolling under the

contract, the applicable statute of limitations applies strictly by analogy. The total

breach of the Settlement Agreement took place on May 28, 2010.133 BioVeris,

therefore, had until May 28, 2013 to file its claims in the Delaware courts under the

analogous three-year statute of limitations for breach of contract claims. 134 BioVeris

did not file this action until June 28, 2013; thus, the action is time barred.135

      B.     The Parties Fail to Address the Relief Plaintiff Seeks Under Section
             8.5.6 of the JVA
      BioVeris also requests two forms of relief it contends are available under

Section 8.5.6 of the JVA. First, BioVeris requests $463,316 to be added to the

Purchase Price (before the interest calculation) as the fifteen percent penalty under

Section 8.5.6(b).136 Second, BioVeris asks for “[a]n order requiring the appointment

to the Board of Managers of [Diagnostics] of one person designated by BioVeris to

133
      Supra section II.A.2.
134
      10 Del. C. § 8106(a).
135
      Compl. 9.
136
      Compl. 2; Oral Arg. Tr. 45.

                                           35
serve as a member of the Board of Managers until payment in full is made, pursuant

to [Section] 8.5.6(a) of the JVA.”137

       The Settlement Agreement “constitutes the entire agreement among the

parties with respect to the subject matter thereof.”138 The subject matter of the

Settlement Agreement appears to be the buyout process and the dependent

provisions. Thus, the Settlement Agreement seemingly superseded Sections 8.5.5

and 8.5.6. The parties, however, failed to address how the Settlement Agreement

effects the availability of these remedies from the JVA. Furthermore, neither party

addressed which dispute resolution provision would govern these claims or

performed any analysis pertaining to the statute of limitations or laches for these

claims. Therefore, the Court reserves judgement on this issue pending supplemental

briefing from the parties.

III.   CONCLUSION
       For the foregoing reasons, Defendants’ Motion for Summary Judgment is

GRANTED in part and RESERVED in part. The parties shall submit supplemental

briefing to address the issues identified in section II.B. above. The trial scheduled

for November 13-15, 2017 is cancelled.

       IT IS SO ORDERED.

137
       Compl. 2; Oral Arg. Tr. 45.
138
       Quinn Aff. Ex. 50, ¶ 45.

                                         36