Court Opinion

ID: 4680723
Source: CourtListenerOpinion
Date Created: 2021-04-23 20:02:58.423508+00
Date Added: 2024-06-11T09:02:07.684522
License: Public Domain

Filed 4/23/21 Vivera Pharmaceuticals v. Alternate Health Corp. CA2/3
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                      DIVISION THREE

 VIVERA PHARMACEUTICALS INC.,                                             B306296

           Plaintiff, Cross-Defendant,                                    (Los Angeles County
           and Appellant,                                                 Super. Ct. No. 18STCV08361)

           v.

 ALTERNATE HEALTH CORP. et al.,

           Defendants, Cross-Complainants,
           and Respondents.

      APPEAL from a judgment of the Superior Court of
Los Angeles County, Richard L. Fruin, Jr., Judge. Affirmed.
      Saied Kashani for Plaintiff, Cross-Defendant, and
Appellant.
      Markham & Read, John J. E. Markham, II, for Defendants,
Cross-Complainants, and Respondents.
                  _________________________
       Respondents Alternate Health Corp. and Alternate Health
USA, Inc. (collectively, Alternate) held a license for a sublingual
(under the tongue) dissolving tablet for delivering marijuana-
derived compounds. Appellant Vivera Pharmaceuticals Inc.
(Vivera) claimed that the license was restricted to nutraceutical
(nonpharmaceutical) products, a claim Alternate disputed. The
parties sought relief in the trial court to resolve the dispute.
After a bench trial, the trial court agreed with Alternate, that its
license gave Alternate the rights to nutraceutical and
pharmaceutical applications. Vivera appeals and contends that
the trial court erred in interpretating the agreement. We
disagree and affirm the judgment.
                         BACKGROUND
I.    The Agreement
      Nonparty EFT Global Holdings Inc., doing business as
Sentar Pharmaceuticals (Sentar), held pending patent
applications to a sublingual dissolving tablet delivery system for
tetrahydrocannabinol (THC) or cannabidiol (CBD) compounds
and other compoundable products. CBD and THC compounds are
derived from the hemp or marijuana plant. Sentar and Alternate
entered into a license agreement (the Agreement) for the
sublingual delivery system. Per section 2.1 of that Agreement,
Sentar granted Alternate “an exclusive license for the use of CBD
and THC (licensee DOES NOT have rights to compound
pharmaceuticals beyond THC without first seeking written
permission from Sentar, such approval will not be unreasonably

                                 2
withheld) and other compoundable nutraceutical[1] products in
tablet form” using the licensed method and process described in
the “Field of Use.” The Agreement defined “ ‘Field of Use’ ” as
“sublingual delivery systems, including CBD and THC and other
compoundable nutraceutical products (non-pharmaceutical) in
tablet form only, under the Licensor Patent Rights.”
      After entering into the Agreement, Alternate submitted
securities filings to a government agency in anticipation of a
private placement of securities in which it described the
Agreement. In one filing, Alternate stated its intent to use
“proceeds of the private placement for commercialization of its
recently acquired CBD delivery system licenses, expansion of its
toxicology laboratory business . . . and for targeted revenue
generating acquisitions in the health care industry.” In three
other securities filings, Alternate referred to its “exclusive
agreement for non-pharmaceutical sublingual delivery of CBD
and THC.” The filings said that under the terms of the
Agreement, Alternate had a license to “patented Sublingual
Delivery Systems to administer CBD and THC nutraceuticals in
tablet form” and described the consideration paid for the “ongoing
development and commercialization of the Technology, and
assistance in obtaining regulatory approvals and permits for
related products.”
II.   Vivera sues Alternate to clarify the Agreement’s scope
      Vivera is a startup seeking to exploit the sublingual
delivery system for CBD and THC in pharmaceutical
applications. According to Vivera, Sentar licensed the sublingual

      1As agreed to by the parties in their stipulated facts,
“nutraceutical” means “nonpharmaceutical.”

                                 3
delivery system technology to it for pharmaceutical applications.2
A dispute therefore arose between Alternate and Vivera
regarding the scope of the Agreement between Alternate and
Sentar.
       Vivera sued Alternate and sought a declaration that Vivera
could exploit the sublingual delivery system for pharmaceutical
products without violating the exclusive license granted in the
Agreement. Alternate cross-complained for intentional
interference with contractual relations and for declaratory and
injunctive relief, seeking, among other things, a declaration it
held an exclusive license to sublingual technology for CBD and
THC tablets.
       The parties stipulated that the sole issue to be tried was
whether the Agreement was restricted to nutraceutical products,
as contended by Vivera, or whether it also granted Alternate use
of the technology for pharmaceutical products containing THC or
CBD. The parties agreed to a bench trial on limited stipulated
facts and exhibits, which included the Agreement and the
aforementioned securities filings. The stipulated facts included
that nutraceutical (nonpharmaceutical) products are dietary
supplements that cannot make explicit efficacy claims and cannot
be marketed to treat or to cure illness or disease. Nutraceutical
products also do not require approval from the FDA, proof of
safety and efficacy, or testing or clinical trials. Pharmaceutical
products, in contrast, can make explicit efficacy claims and can be
marketed to treat or to cure an illness or disease. They therefore
require FDA approval and must have proof of safety and efficacy,

      Alternate’s cross-complaint and trial brief asserted that
      2

Paul Edalat controls both Vivera and Sentar.

                                4
and testing or clinical trials. The parties also stipulated that to
date no party has used the licensed technology to sell any
products.
      After a brief hearing, the parties submitted posttrial briefs.
Vivera argued that the Agreement was limited to nutraceutical
applications of the sublingual tablet system for CBD and THC.
According to Vivera, the Agreement confined the license to that
application, except, admittedly, in one place, section 2.1. That
section, Vivera argued, contained a “misprint,” in that it used the
word “pharmaceutical” instead of “nutraceutical.” Vivera also
interpreted Alternate’s statements in securities filings as
admissions that the Agreement covered only nutraceutical
applications. Vivera thus sought a declaration that the
Agreement was restricted to nutraceutical products, whether or
not the products contained THC or CBD, and the Agreement did
not grant Alternate any pharmaceutical applications.
      Alternate argued to the contrary, that its license granted
the right to compound CBD and THC nutraceutical and
pharmaceutical products. Alternate thus argued that the
Agreement was unambiguous and that section 2.1’s reference to
pharmaceutical products was not a misprint.
      The trial court found in Alternate’s favor, that the
Agreement includes pharmaceutical products containing THC or
CBD, as well as nutraceutical products that utilize the licensed
patent applications. The trial court explained that the
Agreement was not ambiguous on its face and only became so
when read with the parol evidence. Because the Agreement was
not ambiguous on its face and Vivera’s interpretation of it was
strained, the trial court found the parol evidence inadmissible.
The trial court also rejected Vivera’s contention that Alternate’s

                                 5
counsel had conceded in arguments before the trial court that the
license does not include pharmaceutical use of CBD. Accordingly,
the trial court entered judgment in Alternate’s favor.
       Vivera timely appealed.
                          DISCUSSION
I.    Interpretation of the Agreement
       The question presented is whether the Agreement gives
Alternate the right to use the sublingual delivery system for
pharmaceutical and nutraceutical CBD and THC products, or
instead whether the Agreement limits it to nutraceutical ones.
The issue therefore is one of contract interpretation.
       Contract interpretation is a judicial function by which trial
courts must give effect to the parties’ mutual intent when the
contract was executed. (Jade Fashion & Co., Inc. v. Harkham
Industries, Inc. (2014) 229 Cal.App.4th 635, 651–652.)
Ordinarily, the parties’ intent is a legal question determined by
reference to the contract’s terms without considering extrinsic
evidence of any prior agreement or contemporaneous oral
agreement to vary or contradict the clear and unambiguous terms
of a written, integrated contract. (Ibid.; Code Civ. Proc., § 1856,
subd. (a).) However, extrinsic evidence is admissible to interpret
an agreement when a material term is ambiguous. (Jade, at
p. 651.)
       When parties dispute the meaning of a contract term, the
trial court first determines whether the term is ambiguous, that
is, reasonably susceptible to either of the meanings urged by the
parties. (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165.) In
making this determination, the trial court provisionally receives,
without actually admitting, any extrinsic evidence relevant to

                                 6
show the contract could or could not have a particular meaning.
(Pacific Gas & E. Co. v. G.W. Thomas Drayage etc. Co. (1968) 69
Cal.2d 33, 37.) If, in light of the contract’s language and the
extrinsic evidence as to its meaning, the trial court determines
the language is reasonably susceptible to either of the meanings
urged by the parties, the trial court moves to the second step,
determining what the parties intended the contract term to
mean. (Winet, at p. 1165.) If, in light of the extrinsic evidence,
the language is reasonably susceptible to the interpretation
urged, the extrinsic evidence is admitted to aid in interpreting
the contract. (Ibid.) Extrinsic evidence is not, however,
admissible to flatly contradict an agreement’s express terms.
(Consolidated World Investments, Inc. v. Lido Preferred Ltd.
(1992) 9 Cal.App.4th 373, 379.) “[E]xtrinsic evidence cannot be
used to show that when the parties said ‘Bunker Hill Monument’
they really meant ‘the Old South Church’ or that when they said
‘pencils’ they really meant ‘car batteries.’ ” (Curry v. Moody
(1995) 40 Cal.App.4th 1547, 1554.)
       The trial court’s ruling on the first step, the threshold
question of ambiguity, is a question of law subject to independent
review. (Winet v. Price, supra, 4 Cal.App.4th at p. 1165.) The
same is true as to the trial court’s ruling on the second step if no
extrinsic evidence was introduced as to the contract’s meaning or
if extrinsic evidence was not in conflict. (Id. at pp. 1165–1166.)
We apply the substantial evidence test only when conflicting
evidence was introduced as to the meaning of the contract term
and uphold any reasonable construction of the contract supported
by substantial evidence. (Id. at p. 1166.) We are not bound here
by the trial court’s interpretation of the Agreement, because its
determination was not based on conflicting extrinsic evidence.

                                 7
(See, e.g., Tin Tin Corp. v. Pacific Rim Park, LLC (2009) 170
Cal.App.4th 1220, 1225.)
       Here, Vivera contends that the license is confined to
nutraceutical applications, notwithstanding language to the
contrary in section 2.1 of the Agreement. Applying the steps
described above, the first issue is whether section 2.1 is
reasonably susceptible to the interpretation Vivera urges.
Section 2.1 states, Sentar “grants to [Alternate] an exclusive
license for the use of CBD and THC (licensee DOES NOT have
rights to compound pharmaceuticals beyond THC without first
seeking written permission from Sentar, such approval will not
be unreasonably withheld) and other compoundable nutraceutical
products in tablet form.” (Italics added.) On its face, section 2.1
thus grants Alternate a license to use the delivery system for
(1) CBD, (2) THC, and (3) other nutraceutical products. The
parenthetical’s reference to “pharmaceuticals” shows that the
license includes pharmaceuticals, except that Alternate must get
permission before using the delivery system for “pharmaceuticals
beyond THC.”
       To make section 2.1 reasonably susceptible to an
interpretation that the license does not include pharmaceuticals,
the section must be rewritten—which is exactly what Vivera
asks. Vivera asserts that the word “pharmaceuticals” in the
parenthetical was a misprint and that the parties intended to use
the word “nutraceuticals.” To show that there was a misprint,
Vivera reads the phrase “other compoundable nutraceutical
products” later in the sentence as modifying the reference to CBD
and THC at the beginning of the sentence. Thus, according to
Vivera, CBD and THC are examples of other compoundable
nutraceuticals. Under this interpretation, the license is for

                                8
(1) nutraceutical applications of CBD and THC, and (2) other
compoundable nutraceutical products, except Alternate must get
permission to use the technology for nutraceuticals beyond THC.
This is a strained and odd interpretation in that the section
would give Alternate a license for nutraceutical uses of CBD and
then take it away. The parenthetical makes more sense as
written because the license then concerns two applications,
nutraceutical and pharmaceutical uses of CBD and THC. The
parenthetical places a condition on the exclusive license as to one
of the two applications, pharmaceuticals “beyond THC.”3
       To further aid its strained interpretation of the Agreement,
Vivera turns to other tenets of contract interpretation, i.e., that
the whole of a contract is to be taken together so as to give effect
to every part, with each clause aiding in the interpretation of
another, and an interpretation giving effect to all provisions is
preferred to one rendering any part of the contract meaningless.
(Civ. Code, § 1641; Code Civ. Proc., § 1858.) Vivera posits that
other parts of the Agreement support its interpretation, in
particular the definition of “Field of Use,” a term used throughout
the Agreement. “ ‘Field of Use’ ” is defined as “sublingual
delivery systems, including CBD and THC and other
compoundable nutraceutical products (non-pharmaceutical) in

      3 Vivera appears to make an alternative argument that if
section 2.1’s parenthetical is credited at all, it grants only
pharmaceutical use of THC (not CBD), because there was no
evidence Alternate ever sought consent to use the technology for
pharmaceutical CBD. However, whether Alternate ever sought
consent does not necessarily mean that the parenthetical
precludes seeking consent. In any event, the parties stipulated
that to date no party has used the licensed technology to sell any
products.

                                 9
tablet form only, under the Licensor Patent Rights.” Vivera
argues that the parenthetical reference to “non-pharmaceutical”
modifies everything that comes before it, including CBD and
THC. That argument might make more sense if the
parenthetical came right after the references to CBD and THC.
Instead, it comes after “nutraceutical products.”
“Nonpharmaceutical” thus does not operate as a modifier in that
sentence. It operates to define and clarify that nutraceutical is
another word for nonpharmaceutical. Indeed, the parties’ written
trial stipulation, which Vivera’s counsel drafted, similarly put
“non-pharmaceutical” in parentheses after “nutraceutical
products” to clarify for the reader that a nutraceutical product is
a nonpharmaceutical one. Otherwise, the Field of Use provision
does not contradict section 2.1 or prove that the license is for
nutraceutical products only. Rather, it is consistent with a grant
of a license for CBD, THC, and other nutraceutical products,
subject to the limitation in section 2.1’s parenthetical.
       Vivera next cites section 2.5 to show that the Agreement
does not apply to pharmaceutical applications. Section 2.5 states,
“Licensor [Sentar] expressly reserves the right to use License
Patent Rights and associated technology for its purposes, but not
for CBD or THC derived products under the Field of Use.” Vivera
argues that if section 2.1 grants pharmaceutical uses of CBD and
THC, then section 2.5 is a nullity because there was nothing left
to reserve. That is incorrect. Section 2.5 reserves a right to the
technology except for CBD and THC-derived products. Sentar
may otherwise use the technology.
       In arguing that the Agreement as a whole shows that
section 2.1 contains a misprint, Vivera analogizes this case to
Brawner v. Wilson (1954) 126 Cal.App.2d 381. In that case, a

                                10
lease provided that the lessor was to pay 60 cents per “K.W.H.”
for water. (Id. at p. 384.) The court admitted parol evidence to
show that the lease was supposed to say 60 cents for use of a
horsepower pump. (Ibid.) The court agreed the lease clearly
contained a typographical error, in part because paying 60 cents
per kilowatt hour was an absurdity, as it was 60 times the cost of
operating the pump. (Ibid.)
       Unlike Brawner, no absurdity appears on the face of the
Agreement here. On this record, there is nothing absurd about
the license granting rights to nonpharmaceutical and
pharmaceutical applications, especially when marijuana-related
products are at issue. There is, for example, no showing as in
Brawner that the consideration Alternate gave for the license
was wholly inadequate for both applications. What Vivera thus
minimizes as a misprint akin to a typographical error is more like
asking us to vary the terms of the contract, to substitute
“battery” for “pencil.” (See, e.g., Consolidated World Investments,
Inc. v. Lido Preferred Ltd., supra, 9 Cal.App.4th at p. 379; Thrifty
Payless, Inc. v. Mariners Mile Gateway, LLC (2010) 185
Cal.App.4th 1050, 1061 [term stating “each” party has
termination right is not reasonably susceptible to interpretation
giving only one party termination right]; Curry v. Moody, supra,
40 Cal.App.4th at p. 1555 [“ ‘payable at the time of sale of the
house’ ” cannot be reasonably construed as “ ‘payable from the
inception of the contract’ ”].) “Pharmaceutical” and
“nutraceutical” are two different words having opposite, technical
meanings in a specialized area. No misprint is readily apparent.
       Vivera thus turns to extrinsic evidence, i.e., the securities
filings, to show that the license was limited to nutraceutical
applications. The trial court found that since the Agreement was

                                11
unambiguous, extrinsic evidence was inadmissible. Even if
admissible, the trial court found it unpersuasive. We agree that
even if the extrinsic evidence were properly considered, it does
not show that Vivera’s interpretation of the Agreement is correct.
True, Alternate described the Agreement as one for “non-
pharmaceutical sublingual delivery of CBD and THC.” (Italics
added.) Alternate also said it had a license to “patented
Sublingual Delivery Systems to administer CBD and THC
nutraceuticals in tablet form.” (Italics added.) But these
statements are accurate and do not contradict the Agreement.
That is, the Agreement includes nonpharmaceutical sublingual
delivery of CBD and THC. The securities filings merely state
that Alternate entered into an Agreement for those uses.
       Vivera cites no law for its assertion that the securities
filings had to describe fully all rights subject to the license.
Indeed, Alternate also did not mention that the license included
“other nutraceutical products.” Yet, Vivera does not dispute that
the Agreement included such products. Also, the securities
filings refer to “ongoing development and commercialization of
the Technology, and assistance in obtaining regulatory approvals
and permits for related products.” The trial court found that this
showed Alternate’s intent to get FDA approval, which was only
necessary for pharmaceutical applications according to the
parties’ trial stipulation. Per that stipulation, nutraceutical
products do not require FDA approval, proof of safety and
efficacy, and testing or clinical trials, as opposed to
pharmaceutical products which do require those things. In short,
the limited extrinsic evidence before the trial court was
insufficient to show that the parties intended to exclude
pharmaceutical applications.

                               12
     We therefore conclude that, as a matter of law, the
Agreement is not reasonably susceptible to the interpretation
urged by Vivera.
II.   Alternate did not concede any issue.
       Vivera contends that Alternate’s trial counsel conceded in
oral argument before the trial court that the license granted
nutraceutical applications for THC and CBD and only
pharmaceutical ones for THC. However, a judicial concession or
admission occurs when a party judicially admits a fact the
opposing party agrees is true. (Barsegian v. Kessler & Kessler
(2013) 215 Cal.App.4th 446, 452.) The admission can occur via a
statement by counsel if it was a clear and unambiguous
concession of a matter at issue and was not made improvidently
or unguardedly. (Gordon v. Nissan Motor Co., Ltd. (2009) 170
Cal.App.4th 1103, 1112; Fassberg Construction Co. v. Housing
Authority of City of Los Angeles (2007) 152 Cal.App.4th 720, 752.)
       As an initial matter, it is not clear that Vivera agrees the
alleged admission is true. Rather, Vivera’s primary position is
that it is not true, that the Agreement does not include
pharmaceutical applications at all. Vivera only agrees that the
admission is true as an alternative if it loses on its primary
contention.
       In any event, no unambiguous concession was made. The
alleged concession was made at the pretrial hearing in the
context of discussing the issue to be tried. Vivera’s counsel had
just framed the issue as whether the Agreement confined
Alternate to nonpharmaceutical applications, as Vivera was
pursuing clinical trials for pharmaceutical ones. Alternate’s
counsel then said, “Yes. The issue is a little narrower. They got
pharmaceuticals. We got nutraceuticals with one exception. In

                                13
the license it says that we have the right to market and do the
licensing thing with THC. The license agreement itself—I am
just reading one—two sentences from it: ‘licensor,’ that would be
[Sentar], ‘hereby grants to licensee an exclusive license for the
use of CBD and THC, parentheses. ‘Licensee,’ Alternate Health,
‘does not have rights to compound pharmaceuticals beyond THC.’
So we’re contending that they’re marketing THC
pharmaceuticals. And if they are doing clinical trials on it,
maybe they are, maybe they are not, that’s not part of the
stipulation. Because of what that grant says, we contend that
you should not be mark[et]ing THC. Our dec relief that we seek
is simply that the contract grants exclusive license for ten years
starting in 2017, so it’s still alive, grants for ten years an
exclusive license to market THC nutraceutically and
pharmaceutically as I just read.”
       These statements are not a clear and unambiguous
concession that Alternate’s license was for pharmaceutical
applications for THC only and not also for CBD. Rather, counsel
could have been merely agreeing what the dispute was about:
Vivera was claiming it “got pharmaceuticals” and Alternate “got
nutraceuticals with one exception.” Counsel was therefore
framing the dispute, not making a concession about how to
resolve it. Also, when Alternate’s counsel pointed out that Vivera
was marketing THC pharmaceuticals, he merely then countered
that Alternate had the license to market THC pharmaceutically
and nutraceutically. His failure to mention CBD is of no
moment, given that the discussion was focused on Vivera’s
marketing of pharmaceutical THC.
       Moreover, why would Alternate’s counsel have made a
concession contradicting the parties’ stipulation that the issue to

                                14
be tried was whether the Agreement was “restricted to
nutraceutical products (non-pharmaceutical)” or whether the
Agreement “also granted to [Alternate] the use of the subject
technology for pharmaceutical products” containing THC or
CBD? Alternate said in its trial and posttrial briefs that its
position was it had rights to compound nutraceutical and
pharmaceutical CBD and THC products. Thus, based on the oral
statements, the stipulation, and briefing, Alternate’s counsel did
not make an unambiguous concession that its license was limited
to pharmaceutical THC or to nutraceutical products.
III.   Modification of the judgment is unnecessary
       The judgment states that the Agreement “includes
pharmaceutical products containing THC (Tetrahydrocannabinol)
or CBD (cannabidiol) as well as nutraceutical products that
utilize the licensed patent applications.” Vivera asks us to
modify the judgment to include section 2.1’s parenthetical, i.e.,
that “licensee DOES NOT have rights to compound
pharmaceuticals beyond THC without first seeking written
permission from Sentar, such approval will not be unreasonably
withheld.” Although an appellate court may modify a judgment
and order entry of the proper judgment (Code Civ. Proc., § 43), we
see no reason to modify the judgment here. The judgment is a
simple and correct statement of what the Agreement provides
and in no way contradicts it or otherwise writes the parenthetical
out of the Agreement.

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                         DISPOSITION
      The judgment is affirmed. Alternate Health Corp. and
Alternate Health USA, Inc., shall recover their costs on appeal.
      NOT TO BE PUBLISHED IN THE OFFICIAL
REPORTS

                                     EDMON, P. J.

I concur:

            EGERTON, J.

            SALTER, J.*

      *Judge of the Orange County Superior Court, assigned by
the Chief Justice pursuant to article VI, section 6 of the
California Constitution.

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