Court Opinion

ID: 37639
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:55:51+00
Date Added: 2024-06-11T17:15:44.890628
License: Public Domain

United States Court of Appeals
                                                                Fifth Circuit
                                                             F I L E D
               IN THE UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT                February 10, 2005
                      _______________________
                                                         Charles R. Fulbruge III
                            No. 04-10417                         Clerk
                      _______________________

                FIBROGEN, INC.; SKIN SCIENCES, INC,

                      Plaintiffs - Appellees,

                                 v.

               CELLEX-C INTERNATIONAL, INC.; ET AL.,

                            Defendants,

   CELLEX-C INTERNATIONAL, INC.; CELLEX-C COSMACEUTICALS, INC;

                  ANTI-AGING INTERNATIONAL, INC.,

                     Defendants - Appellants.

                      _______________________

           Appeal from the United States District Court
                for the Northern District of Texas
                            (00-CV-778)
                      _______________________

Before GARWOOD, JONES and PRADO, Circuit Judges.

PER CURIAM:*

     In this breach of contract case, Appellants contend that the

district court erred in granting summary judgment against them.

Appellants claim that this ruling was error because they

presented evidence—although not argument—that they were

fraudulently induced to enter into the contract at issue.

     *
      Pursuant to 5TH CIRCUIT RULE 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIRCUIT
RULE 47.5.4.

                                 1
Because we conclude that the district court did not plainly err

in granting summary judgment, we affirm.

     This case arises from a settlement agreement resolving five

lawsuits between the parties, Appellants Cellex-C International,

Inc.; Cellex-C Cosmaceuticals, Inc.; and Anti-Aging

International, Inc. (collectively “Cellex C”) and Appellees

FibroGen, Inc. and Skin Sciences, Inc. (collectively

“FibroGen”).1   As part of the settlement, Cellex-C signed a

promissory note for $500,000.   After making several payments,

Cellex-C stopped paying FibroGen under the agreement and note.

In response, FibroGen filed this lawsuit for, among other things,

breach of the settlement agreement and promissory note.    The

district court ordered the settlement agreement claims to

arbitration, but retained jurisdiction over the promissory note

claim.

     Shortly after the district court lifted a discovery stay,

FibroGen moved for summary judgment.   The district court granted

the motion, finding that FibroGen established its claim for

breach of the promissory note as a matter of law.   The district

court then awarded FibroGen damages of $395,000, plus $146,149.33

in prejudgment interest and $95,177.58 in attorney’s fees.

Cellex-C timely appealed.

     On appeal, Cellex-C argues that it presented sufficient

     1
      The settlement agreement provides that it is to be
construed under New York law.

                                 2
evidence of a fraudulent-inducement affirmative defense to

prevent summary judgment.    This defense is based on Cellex-C’s

contention that, during the settlement talks, FibroGen

misrepresented the status of its licensing negotiations with

another company.   According to Cellex-C, the advanced stage of

these negotiations was a critical part of its decision to enter

into the settlement agreement and the related promissory note.

Cellex-C argues that it only stopped paying on the note after

discovering FibroGen’s misrepresentation.

     Nevertheless, Cellex-C never raised this affirmative defense

before the district court.    Fraudulent inducement does not appear

in Cellex-C’s answer.   More importantly, it cannot be found in

Cellex-C’s response to FibroGen’s motion for summary judgment.

This response contained two objections.    First, Cellex-C

contended that FibroGen had itself materially breached the

contracts by failing to defend certain patents, failing to report

royalties, and breaching its duty of good faith and fair dealing.

Second, Cellex-C argued that the promissory note had been

modified.

     We review issues raised for the first time on appeal for

plain error.   Riley Stoker Corp. v. Fid. & Guar. Ins.

Underwriters, 26 F.3d 581, 589 (5th Cir. 1994).    Under this

standard, we have the discretion to correct “a plain forfeited

error affecting substantial rights if the error seriously affects

                                  3
the fairness, integrity or public reputation of judicial

proceedings."     Douglass v. United Serv. Auto. Ass’n, 79 F.3d
1415, 1424 (5th Cir. 1996)(en banc)(quoting United States v.

Olano, 507 U.S. 725,736).

     Cellex-C argues that caselaw does not require it to have

raised the specific fraudulent inducement argument before the

district court.    Admittedly, Cellex-C’s good faith and fair

dealing argument was, like its current fraudulent inducement

argument, based on allegations involving FibroGen’s licensing

negotiations.2    Cellex-C claims that, by raising the issue of the

these negotiations in another context, it presented the district

court with sufficient evidence of a fraudulent inducement

defense.   Therefore, according to Cellex-C, its failure to

actually raise fraudulent inducement should not matter.    In

essence, Cellex-C contends that by presenting this evidence for

its breach of good faith and fair dealing argument, it put the

fraudulent inducement issue into play.

     The cases that Cellex-C cites do not adequately support this

     2
      Notably, Cellex-C’s discussion of good faith and fair
dealing in its summary judgment response only contends that
FibroGen told it about the proposed license agreement. Nowhere
does it indicate that FibroGen’s representation was false, which
is one of the elements of a fraudulent inducement claim under New
York law. See Banque Arabe et Internationale D’Investissement v.
Maryland Nat. Bank, 57 F.3d 146, 153 (2d Cir. 1995).

                                   4
argument, however.3   These cases mostly deal with the effect of

attaching evidence to summary judgment response but not

specifying what issue that evidence supports.   See, e.g., Keiser

v. Coliseum Props., Inc., 614 F.2d 406, 410 (5th Cir. 1980).4

One case that Cellex-C cites points out this distinction:

     Neither the cited cases nor the case before us now deals
     with raising a distinct issue for the first time on
     appeal or introducing new material into the record on
     appeal, but rather with the failure of an opponent to
     summary judgment to point out to the district court
     support already in the record for the position that an
     issue is actually shown by the record to be in dispute.

Nicholas Acoustics & Specialty Co. v. H & M Constr. Co., 695 F.2d
839, 846 n.7 (5th Cir. 1983).

     Thus, nothing in the caselaw removes this case from the

ordinary rule: issues raised for the first time on appeal are

reviewed for plain error.   Cellex-C’s fraudulent inducement

defense is this kind of issue, and thus we review it for plain

error.   After conducting such a review, we conclude that the

district court did not plainly err in granting summary judgment.

AFFIRMED.

     3
      Cellex-C never addresses the plain error standard of
review. Instead, Cellex-C only challenges FibroGen’s second
argument that it completely waived this defense by failing to
plead it in its answer.
     4
      Other cases Cellex-C cites address raising an issue at
summary judgment that has not been included in the pleadings.
See, e.g., Eastland v. Tenn. Valley Auth., 553 F.2d 364, 370 (5th
Cir. 1977).

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