Glaxosmithkline LLC v. Dendreon Corp.

GlaxoSmithKline LLC v. Dendreon Corp., 

.

 STATE OF NORTH CAROLINA                     IN THE GENERAL COURT OF JUSTICE
                                                 SUPERIOR COURT DIVISION
 COUNTY OF DURHAM                                       11 CVS 5458

 GLAXOSMITHKLINE LLC,                    )
                                         )
                 Plaintiff,              )
                                         )
         v.                              )
                                                   ORDER AND OPINION
                                         )
 DENDREON CORPORATION,                   )
                                         )
                 Defendant.              )
                                         )

        {1}   THIS MATTER is before the Court on Plaintiff GlaxoSmithKline,
LLC’s Motion for Partial Summary Judgment (“GSK’s Motion”) and Defendant
Dendreon Corporation’s Cross-Motion for Summary Judgment (“Dendreon’s
Motion”), pursuant to Rule 56 of the North Carolina Rules of Civil Procedure
(“Rule(s)”). For the reasons expressed below, GSK’s Motion is GRANTED in part
and DENIED in part, and Dendreon’s Motion is GRANTED in part and DENIED in
part.
        Womble Carlyle Sandridge & Rice, LLP by Pressly M. Millen and Betsy Cook
        Lanzen for Plaintiff.

        Hunton & Williams LLP by Patrick L. Robson, Melissa A. Romanzo, Thomas
        G. Slater, Jr., and D. Kyle Sampson for Defendant.

                              I.    INTRODUCTION


        {2}   GlaxoSmithKline, LLC (“GSK”) and Dendreon Corp. (“Dendreon”)
contracted for GSK’s production of PA2024, a recombinant prostate antigen used by
Dendreon to manufacture Provenge®, a treatment for certain forms of prostate
cancer. Dendreon exercised its right to terminate the contract. GSK does not
contest Dendreon’s right to terminate but contends that Dendreon has failed to
abide by its termination obligations in failing to make certain payments to GSK.
Dendreon contends that it has fulfilled all termination obligation barring any
breach of contract claim, and that GSK’s other claims are not actionable claims in
light of the express contractual provisions.
      {3}    Each party contends that the court can and should summarily
determine the competing positions based on contractual provisions which are not
ambiguous. They agree the contract claim is governed by New York law.
      {4}    The Court concludes that there are no unresolved material issues of
fact, the relevant contract terms are not ambiguous, and that, as a matter of law:
GSK is entitled to be paid for a Firm Order for 700 grams of PA2024; GSK is not
entitled to Extension Payments; and GSK’s claims should be limited to breach of
contract, so that its claims for breach of the implied covenant and for unfair and
deceptive trade practices should be dismissed.
      {5}    Accordingly, each of the Motions is GRANTED IN PART and DENIED
IN PART.


                       II.    PROCEDURAL BACKGROUND


      {6}     GSK initiated this action on October 27, 2011. GSK’s initial complaint
asserted claims for breach of contract and breach of the implied covenant of good
faith and fair dealing. With leave of court, GSK by amendment added a claim for
an unfair and deceptive trade practice pursuant to 

.
Dendreon filed its Answer and Counterclaim for breach of contract on January 12,
2012. GSK replied on February 23, 2012.
      {7}    GSK filed its Motion for Partial Summary Judgment on December 5,
2013, seeking summary adjudication that Dendreon is liable to GSK for payment on
a “Firm Order” representing the first eighteen months of a rolling thirty-six month
needs forecast for PA2024, last affirmed on August 22, 2011. On January 7, 2014,
Dendreon both filed its opposition to GSK’s Motion and filed its own Cross-Motion
for Summary Judgment. In opposing GSK’s Motion, Dendreon asserts that it
exercised its uncontested contractual right to terminate, and was entitled to cancel
the Firm Order GSK seeks to enforce because GSK had not yet begun to
manufacture Product prior to termination. By its Cross-Motion, Dendreon seeks a
summary adjudication that it has fully complied with its termination obligations,
which would include the determination that GSK is not entitled to Extension Fees
for the two months following notice of termination, nor does GSK have a basis to
assert any claim other than its breach of contract claim.
      {8}       GSK later on June 11, 2014 filed a separate motion for summary
judgment attacking Dendreon’s counterclaims. That motion is not presently before
the Court and is not addressed by this Order and Opinion.
      {9}       Both Motions now before the Court are fully and extensively briefed;
the court has heard oral argument; and the Motions are ripe for disposition.


             III.        STATEMENT OF RELEVANT UNCONTESTED FACTS


      {10}          A court does not make findings of fact when ruling upon summary
judgment, but it may summarize undisputed material facts upon which its
determination rests. See, e.g., Hyde Ins. Agency, Inc. v. Dixie Leasing Corp., 

, 

, 164–65 (1975).
      {11}      While the briefs reflect certain factual disputes, the material facts
necessary to resolve the Motions are uncontested. Those facts are detailed below for
explanation of the Court’s determinations.

      A.     The Essential Contractual Terms

       {12} The dispute primarily includes contested interpretation of provisions
in and obligations arising from the “Development and Supply Agreement Between
GlaxoSmithKline LLC and Dendreon Corporation Effective As of September 15,
2010” (“DSA”). The DSA in its Section 16.4 incorporates certain provisions of an
earlier Heads of Agreement the parties entered on December 18, 2009.
      {13}      The DSA provided that GSK would first undertake activities to
implement, scale-up, test, and validate a manufacturing process for a Product,
defined as PA2024. This effort was to be accomplished during a “Process
Implementation Phase.” The end result of the Process Implementation Phase was
the successful manufacture of three consecutive Conformance Batches. The Process
Implementation Phase would then be followed by the “Manufacture Phase,” during
which GSK would manufacture and supply the Product for human clinical trial and
commercial use.
      {14}   Although the DSA defines many terms, it does not define the term
“manufacture.”
      {15}   DSA Section 2.4(a) reflects that the Process Implementation Phase was
initially projected to end as of August 1, 2011, but could be extended in the event of
a “Delay Event.” If a Delay Event occurred, Dendreon could elect to have GSK
continue efforts to implement the Process for a maximum period of six months, in
which event, Dendreon would pay GSK a monthly Extension Fee of two million
dollars ($2,000,000). A Delay Event was defined to exclude delay caused solely by
GSK’s action or inaction.
      {16}   DSA Section 2.4(b) provides that if one or more Delay Events occur
such that Conformance Batches have not commenced by September 1, 2011, then
either GSK or Dendreon could terminate the DSA upon sixty days’ prior written
notice. During the sixty-day termination period, each would perform its
termination obligations but would not be required to continue Commercially
Reasonable Efforts to implement the Process.
      {17}   It is undisputed that Conformance Batches had not commenced by
September 1, 2011. It is further undisputed that there had been Delay Events.
      {18}   On September 1, 2011 Dendreon provided sixty days’ written notice
that the DSA was terminated effective October 31, 2011. (“Termination Letter”)
      {19}   Dendreon paid GSK a one-month’s Extension Fee for the month of
August 2011. It has not paid GSK an Extension Fee for September 2011 or October
2011, although as discussed below, it offered to pay two months’ Extension Fees if
GSK would acknowledge and agree that Dendreon had cancelled the Firm Order
that had been placed before notice of termination.
       {20}    GSK did not acknowledge that the Firm Order placed before notice of
termination was cancelled or that Dendreon had the right to cancel it. GSK asserts
that it is entitled to recover payment for a Firm Order of 700 grams of Product.1
GSK contends that the obligation to pay matured as of the date of termination,
because the Termination Letter effectively precluded GSK from further
manufacturing and triggered the contractual provision that excuses GSK from any
obligation to manufacture Product. Dendreon instead contends it could cancel the
Firm Order if it did so before GSK had commenced actual product manufacture.
       {21}    The obligation for Dendreon to place a Firm Order was triggered
immediately upon executing the DSA. DSA Section 3.3 required Dendreon on the
Effective Date to provide GSK with a thirty-six month non-binding rolling forecast
of its Product requirements. Dendreon was required to update the forecast before
the first day of each calendar quarter. The first eighteen months of each forecast is
deemed a binding “Firm Order.” GSK was required to accept or reject each such
Firm Order within fifteen days of receiving the forecast. The DSA defines a Firm
Order to be “a binding obligation to purchase the grams of Product specified
therein.” (DSA § 1.)
       {22}    The DSA defines “Product”, to wit:
       “Product” shall mean purified bulk component of PA2024, a
       recombinant prostate antigen. The Product is a raw material used in
       the manufacture of sipuleucel-T, Dendreon’s cancer immunotherapy
       marketed as Provenge® pursuant to the BLA.
(DSA § 1.) The “BLA” is the Biological License Application filed with the FDA for
the Product.
       {23}    While the DSA defined certain performance specifications for the
commercial product, the definition of Product does not itself incorporate those
specifications.



1The total of 700 grams represented 300 grams for the first partial year of the Manufacture Phase

and the full year thereafter. This was the amount stated in the first forecast after the DSA was
entered, and has been reaffirmed, the last time on August 22, 2011. The same 700 gram figure is
reflected in DSA Schedule 4.1 related to pricing.
      {24}   DSA Section 2.3 provides that upon accepting a Firm Order, GSK was
required to reserve appropriate manufacturing capacity to meet the forecasted
demand. GSK also acknowledged when executing the DSA that it had been paid for
the reservation of capacity by receipt of the reservation fee as provided by the
Heads of Agreement.
      {25}   DSA Section 4.1 establishes a mechanism for determining pricing for
initial efforts during the Process Implementation Phase, for manufactured product,
and for Extension Fees if owed.
      {26}   Article 7 of the DSA provides for cross-licensing of the parties’
respective intellectual property in performing obligations under the DSA.
      {27}   While DSA Section 2.4 allowed for termination in the event
Conformance Batches had not begun as of September 1, 2011, the termination
obligations for any termination were provided in DSA Article 14. Section 14.2
provides for a notice and cure process prior to termination for material breach.
When terminating, Dendreon relied on the failure to commence Conformance
Batches as provided in Section 2.4, and its Termination Letter did not recite any
claimed material breach.
      {28}   Article 14 provides for when payments will be required in connection
with termination. Section 14.3(a)(4) relates to payments for Product batches
completed at the time of termination which meet conformance requirements for
Final Release. Section 14.3(a)(5) relate to payment for Product batches which had
been initiated as of the date of termination. GSK does not claim that it had
initiated or completed Product batches subject to this subparagraphs.
      {29}   GSK premises its claim for the Firm Order of 700 grams on Section
14.3(a)(6), which provides that:
      In the event . . . (ii) Dendreon instructs GSK to cease manufacture of
      Product, with respect to Firm Orders placed by Dendreon prior to the
      effective date of termination or the date on which manufacture ceases
      (as the case may be), Dendreon shall pay one hundred percent (100%)
      of the then applicable Price for the grams of Product specified in said
      Firm Orders and meet Final Release specifications; and unless
      Dendreon instructs GSK in writing to cease manufacture of the grams
       of Product specified in said Firm Orders, GSK shall complete the
       manufacture of grams of Product specified in said Firm Orders.
(DSA § 14.3(a)(6).)
       {30}   GSK and Dendreon agree the Firm Order had been placed before
termination. The dispute concerns whether GSK was instructed to cease
manufacture, and if so, whether that leads to the conclusion that it is entitled to be
paid for Product specified in the Firm Order even though it necessarily could not
meet Final Release specifications when it could not be manufactured because of
Dendreon’s instruction, or whether payment is only due when Product which meets
those specifications has been made.
       {31}   Section 15.4 of the DSA provides that the DSA and Heads of
Agreement are to be governed by, construed and enforced pursuant to New York
law.

       B. Events Surrounding Dendreon’s Termination

       {32}   Dendreon’s Termination Letter, dated September 1, 2011, made
termination effective as of October 31, 2011.
       {33}   The Termination Letter asserts that the termination was pursuant to
Sections 2.4 and 14.2(d) of the DSA because of Delay Events such that Conformance
Batches had not commenced by September 1, 2011.
       {34}   The Termination Letter recites Dendreon’s position that it was entitled
to cancel all prior purchase orders. It offers to pay Extension Fees, conditioned on
GSK acknowledging and accepting that such orders had been cancelled. The letter
recites, in part, as follows:
       By signing the acknowledgement below, GSK agrees with Dendreon
       that the Agreement is rightfully terminated and that each Party shall
       fulfill its termination obligations under the Agreement. The Parties
       further agree for clarity that, as the Manufacturing Phase has not yet
       commenced and no production runs or Product batches have been
       initiated as of the date hereof nor will be initiated prior to the
       Termination Effective Date, Dendreon has no liability to GSK for the
       costs of any Product purchase orders, which are all hereby formally
       cancelled. Subject to GSK’s acknowledgement and agreement below:
      (1) Dendreon will continue to pay GSK the Extension Fee of $2 million
      per calendar month through the Termination Effective Date, for a total
      payment of $4 million; (2) Dendreon acknowledges that the $1 million
      suite reservation fee is forfeited to GSK as of Termination Effective
      Date; and (3) upon receipt of, and in accordance with, shipping
      instructions from Dendreon, GSK will ship (or in the case of certain
      raw materials, destroy, as requested by Dendreon) equipment and raw
      materials purchase on behalf of Dendreon in support of the Agreement
      and invoice Dendreon for such activities.
(Pl.’s Mot. Partial Summ J., Ex. E (“Termination Letter”).)
      {35}   In response, GSK asserted that the Firm Order had not been cancelled
and demanded that Dendreon pay the contract Price 700 grams of Product.
      {36}   Dendreon reaffirmed the forecast which included an initial 700 gram
eighteen month forecast on August 22, 2011, although both GSK and Dendreon
have pointed to evidence that by that date other facts had been made public which
cast doubt on this need. GSK, in fact, contends that facts now reveal that Dendreon
knew that it would need no Product during the forecasted period.

      C. Summary of Claims and Defenses

         1. Contractual Termination Obligations

      {37}   GSK contends the Termination Letter instructed GSK to cease
manufacture within the meaning of DSA Section 14.3(a)(6), excusing GSK from any
responsibility to complete manufacture and obligating Dendreon to pay for the Firm
Order placed prior to the date of termination. GSK further asserts its right to
Extension Fees for the two months included in the termination period of sixty days
after notice. GSK asserts that Dendreon’s early termination resulted in savings,
including further Extension Fees and other costs that would have been incurred by
continuing the DSA beyond the termination effective date. GSK further asserts
that payment to it for the Firm Order is fair compensation for other manufacturing
opportunities GSK forewent in entering the DSA.
      {38}   Dendreon contests any obligation to pay either for the Firm Order or
Extension Fees. As to the Firm Order, Dendreon contends that: (1) in the first
instance, the Termination Letter cannot be fairly read to instruct GSK to cease
within the meaning of DSA Section 14.3(a)(6) because GSK had not completed the
Process Implementation Phase and had never begun manufacture; (2) even if the
Termination Letter could be read as GSK contends, the contract language clearly
obligates Dendreon to pay only for Product which meets Final Release
specifications; (3) therefore, a Firm Order could be cancelled without payment prior
to actual manufacturing of Product batches had begun. Dendreon contends
affording GSK payment for Product it never manufactured would be both a windfall
for GSK and an illegal penalty against Dendreon. As for Extension Fees, Dendreon
acknowledges that it made a compromise offer to pay them in exchange for GSK
agreeing that the Firm Order had been cancelled, but when GSK refused to so
agree, the contract language controls, and the contract language clearly conditions
the payment of any Extension Fee on Dendreon requesting GSK to continue efforts
to extend the Process Implementation Fees and the Termination Letter clearly did
not represent that Dendreon had so requested.

         2. GSK’s Claims Other Than Breach of Contract

      {39}   GSK contends that, at a minimum, there are fact issues as to whether
first, Dendreon committed an unfair and deceptive trade practice act and breached
the implied covenant of good faith and fair dealing. Dendreon denies the factual
premise of those claims, but asserts through its Cross-Motion that the claims simply
mirror GSK’s breach of contract claim and cannot proceed as independent claims.

                a. The Chapter 75 Claims

      {40}   GSK’s Chapter 75 claim makes three essential allegations:
      (a) Dendreon attempted to coerce GSK to surrender its rights under the DSA
         by withholding $4 million in Extension Fees Dendreon knew it owed;
      (b) Dendreon provided GSK with a knowingly false forecast while
         surreptitiously planning to terminate the DSA; and
      (c) Dendreon communicated false statements as a pretext to conceal damages
          that would be owed upon termination of the DSA.
(Pl.’s Mem. Opp’n Def.’s Mot. Summ. J. (“Pl. Opp’n Br.”) 9.)
      {41}   These allegations revolve around the forecast issued on August 22,
2011, which was followed by the September 1, 2011 Termination Letter. While GSK
asserts that the forecast was deceptive because Dendreon knew that it would not
need the Product as forecasted, GSK also alleges that during August 2011
Dendreon made public statements regarding reduced demand for Provenge, had
reduced its revenue guidance downward as a result, and had begun moves to reduce
expenses and realign its workforce. (Pl.’s Mem. Supp. Mot. Partial Summ. J. 8.)
GSK contends that Dendreon sought to feign a contamination event as a basis to
“slow walk” GSK’s development schedule, knowing that it intended to terminate the
DSA, and its effort to do so was to minimize Dendreon’s exposure. (Pl. Opp’n Br. 5–
6, Exs. J, L (indicating August conclusion that no Product would be needed from
GSK).) GSK cites testimony and documents which it contends prove that Dendreon
sought to mask its true intentions. But, viewed in context, this testimony and the
documents indicate that the underlying activity of which GSK complains very
closely preceded Dendreon issuing its Termination Letter, and that withholding the
truth from GSK, if it occurred, was necessary for Dendreon’s management to
finalize its decision to terminate before making any statement of its intent to do so.
(Pl. Opp’n Br. Ex. L; Marcus Dep. 172:15–16, Jan. 10, 2013 (Dendreon “should wait
on telling GSK to hold off on anything until next week”).)
      {42}   GSK casts Dendreon’s conditioning Extension Fees payment on GSK’s
acquiescence in cancelling the Firm Order as an inequitable use of power and
position. (Pl. Opp’n Br. 10–12.)
      {43}   Dendreon’s opposition is essentially that these claims merely
repackage GSK’s breach of contract claim, are not separately actionable, and fail for
the same reasons that the breach of contract claim fails.
                 b. The Implied Covenant of Good Faith and Fair Dealing Claim

      {44}    GSK contends that “Dendreon violated the covenant of good faith and
fair dealing when it ordered GSK to cease its manufacture of Firm Orders of
PA2024 so that Dendreon could disingenuously and erroneously disclaim its
“binding obligation” to pay GSK the price for all Firm Orders. (Pl. Opp’n Br. 16.)
GSK elaborated in its brief as follows:
      To be clear, Dendreon breached the DSA when it terminated the
      parties’ contract without paying GSK for all Firm Orders, and this is
      the primary source of GSK’s breach of contract claim. However, this is
      not the source of GSK’s breach of the covenant of good faith and fair
      dealing claim. Rather, the basis of this claim is Dendreon’s bad faith
      contrivance to terminate the contract prior to the commencement of
      the manufacturing phase (a condition precedent asserted by Dendreon)
      for the purpose of reducing its termination obligations.
(Pl. Opp’n Br. 19.)
      {45}    In short, GSK claims Dendreon terminated the DSA early so that it
could wrongfully disclaim any obligation to pay for a Firm Order when the
Manufacture Phase had not yet begun. This, GSK contends, constituted a breach of
the implied covenant in addition to the breach of the express terms of the contract
which mandated payment.
      {46}    As with the Chapter 75 claim, Dendreon contends the claim is no more
than a repackaging of the breach of contract claim and cannot be separately
actionable.

                              IV.   LEGAL STANDARDS

      A. The Summary Judgment Standard

      {47}    Summary judgment is proper when the pleadings, depositions,
answers to interrogatories, admissions, and submitted affidavits show that no
genuine issue as to any material fact exists and that the movant is entitled to
judgment as a matter of law. N.C. R. Civ. P. 56(c); Andresen v. Progress Energy,
Inc., 

, 

, 160–61 (2010).
      {48}   The moving party must demonstrate the absence of a triable issue and
does so either “(1) by showing that an essential element of the opposing party’s
claim is nonexistent; or (2) by demonstrating that the opposing party cannot
produce evidence sufficient to support an essential element of the claim or overcome
an affirmative defense which would work to bar [its] claim.” Wilhelm v. City of
Fayetteville, 

, 

 (1995) (citing Roumillat v.
Simplistic Enters., Inc., 

, 

 (1992)).
      {49}   If the moving party carries this burden, the nonmoving party “must
‘produce a forecast of evidence demonstrating that the [nonmoving party] will be
able to make out at least a prima facie case at trial.’” Roumillat, 

, 

 (quoting Collingwood v. G.E. Real Estate Equities, 

,

 (1989)); Rankin v. Food Lion, 

, 

, 313–14 (2011). This forecast “may not rest upon the mere allegations or
denials of [a] pleading.” N.C. R. Civ. P. 56(e).

      B. New York Principles of Contract Law

      {50}   The Court finds the DSA’s choice of law provision valid and
enforceable. See, e.g., Cable Tel. Servs. v. Overland Contracting, Inc., 

, 642–43, 

, 33–34 (2002) (noting North Carolina courts
typically enforce choice-of-law provisions in contracts). Accordingly, the breach of
contract and implied covenant of good faith and fair dealing related to the contract
are governed by New York law.

          1. Enforcing a Contract of Which Terms Are Not Ambiguous

      {51}   When “parties dispute the meaning of particular contract terms,” the
court must first “determine whether such terms are ambiguous.” Banco Espirito
Santo, S.A. v. Concessionaria Do Rodoanel Oeste S.A., 

, 24 (N.Y.
App. Div. 2012). This is a question of law for the court. Bailey v. Fish & Neave, 

 (N.Y. 2007). Unambiguous contract provisions are then
interpreted by the court as a matter of law unaided by extrinsic evidence. Beal Sav.
Bank v. Sommer, 

 (N.Y. 2007); R/S Assocs. v. N.Y. Job Dev.
Auth., 

 (N.Y. 2002); W.W.W. Assocs. v. Giancontieri, 

 (N.Y. 1990).
      {52}   “A contract is ambiguous if the terms are ‘reasonably susceptible [to]
more than one interpretation.’” Obstfeld v. Thermo Niton Analyzers, LLC, 

 (N.Y. App. Div. 2013) (quoting Chimart Assoc. v. Paul, 

 (N.Y. 1986)). But a contract is not ambiguous if its terms “have a
definite and precise meaning and are not reasonably susceptible to differing
interpretations.” RJE Corp. v. Northville Indus. Corp., 

 (2d Cir.
2003) (applying New York law) (quoting Sayers v. Rochester Tel. Corp.
Supplemental Mgmt. Pension Plan, 

, 1095 (2d Cir. 1993) (applying New
York law)); Breed v. Ins. Co. of N. Am., 

 (N.Y. 1978). The
critical test is whether each of competing interpretations are reasonable. A
contract term “does not become ambiguous merely because the parties urge
different interpretations . . . unless each is a ‘reasonable’ interpretation[.]” Law
Debenture Trust Co. v. Maverick Tube Corp., 

 (2d Cir. 2010)
(applying New York law).
      {53}   In assessing the reasonableness of competing contract constructions,
the court examines “the entire contract and consider[s] the relation of the parties
and the circumstances under which it was executed, with the wording viewed in the
light of the obligation as a whole and the intention of the parties as manifested . . .”
Banco Espirito Santo, S.A., 951 N.Y.S.2d at 24 (citations and marks omitted). The
court neither grafts conditions onto the contract language the parties themselves
did not incorporate nor construes the language in a manner that distorts the
meaning of terms the parties did include. Korosh v. Korosh, 

, 74
(N.Y. App. Div. 2012). A court is reluctant to imply a term the parties could have
but neglected to include. Vt. Teddy Bear Co. v. 538 Madison Realty Co., 

 (N.Y. 2004) (quoting Rowe v. Great Atl. & Pac. Tea Co., 

 (N.Y. 1978)). Where possible, the court construes the contract which neither
renders an included term meaningless , nor give a term a meaning inconsistent
with other contract terms. Compare RJE Corp., 

 and Givati v. Air
Techniques, Inc., 

, 198 (N.Y. App. Div. 2013), with Bijan Designer
for Men, Inc. v. Fireman’s Fund Ins. Co., 

, 33–34 (N.Y. App. Div.
2000) (quoting Atwater & Co. v. Panama R.R. Co., 

 (1927) and
Proyecfin de Venezuela, S.A. v. Banco Indus. de Venezuela, S.A., 

, 395–
96 (2d Cir. 1985)). Likewise, a construction of contract terms which would create
unintended and unfair inconsistencies that are not otherwise apparent should be
rejected. James v. Jamie Towers Hous. Co., 

 (N.Y. App. Div.
2002), abrogated on other grounds by Kershaw v. Hosp. for Special Surgery, 

, 19–22 (N.Y. App. Div. 2013).

          2. The Implied Covenant of Good Faith and Fair Dealing

      {54}   New York law implies a covenant of good faith and fair dealing during
the course of performance into every contract in order to prohibit one party from
performing in a manner that deprives the other of the benefits of the contract. 511
West 232nd Owners Corp. v. Jennifer Realty Co., 

 (N.Y. 2002);
see also Wieder v. Skala, 

 (N.Y. 1992). However, New York
precedent “does not recognize a separate cause of action for breach of the implied
covenant of good faith and fair dealing when a breach of contract claim, based upon
the same facts, is also pled.” Fantozzi v. Axsys Tech, Inc., No. 07 Civ. 2667 (LMM),

, at *4–5 (S.D.N.Y. Aug. 20, 2007) (quoting Harris v.
Provident Life and Acc. Ins. Co., 

 (2d Cir. 2002)). “A claim for breach
of the implied covenant [of good faith and fair dealing] ‘will be dismissed as
redundant where the conduct allegedly violating the implied covenant is also the
predicate for breach . . . of an express provision of the underlying contract.” ICD
Holdings S.A. v. Frankel, 

, 243–44 (S.D.N.Y. 1997) (quoting
Houbigant, Inc. v. ACB Mercantile, Inc., 

, modified, 

 (S.D.N.Y. 1995)); see also Amcan Holdings, Inc. v. Canadian Imperial
Bank of Commerce, 

, 49–50 (N.Y. App. Div. 2010).
      {55}   Where a breach of contract claim is based on termination, an implied
covenant claim does not preclude an unqualified right to terminate, and generally
the motive that leads the party to exercise an express unconditional right to
terminate is not controlling. Triton Partners LLC v. Prudential Sec. Inc., 

 (N.Y. App. Div. 2003). However, the implied covenant may constrain
a party from exercising a contract right if the exercise is misused for the purpose of
gaining unfair personal gain while at the same time foreclosing the other party’s
ability to enjoy expected benefits of the contract. Richbell Info. Servs. v. Jupiter
Partners, L.P., 

, 586–87 (N.Y. App. Div. 2003). In general, a
contracting party may not unfairly take action that blocks the opposing party’s
ability to perform a condition precedent in order to invoke failure to meet that
condition to defeat its own contract obligations. Cauff, Lippman & Co. v. Apogee
Fin. Grp., Inc., 

 (S.D.N.Y. 1992). On the other hand, the
implied covenant of good faith and fair dealing is not intended to forestall a party
from relying on a reasonable construction of express contract language to assert
unmet conditions that are precedent to the opposing party’s ability to receive
benefits under the contract. Moran v. Elk, 

 (N.Y. 2008).
      {56}   “The covenant of good faith and fair dealing cannot be used to add a
new term to a contract, especially to a commercial contract between two
sophisticated commercial parties represented by counsel.” D&L Holdings, LLC v.
RCG Goldman Co., 

 (N.Y. App. Div. 2001).

      C. The Unfair and Deceptive Trade Practice Claim


      {57}   Both parties brief their arguments regarding GSK’s unfair and
deceptive trade practice claim pursuant to North Carolina law, on the apparent
understanding that the claim is extra-contractual and is not governed by the
contract’s choice of law provision. The proper conflicts of law rule to be applied to
Chapter 75 claims remains uncertain, as different North Carolina Court of Appeals
decisions have applied both a test of most significant relationship and the rule of lex
loci. See Noel L. Allen, North Carolina Unfair Business Practice § 5.05, and cases
cited (3rd ed. 2014). Here, the facts appear to be such that a detailed
comprehensive conflicts of law analysis would result in the application of North
Carolina law under either test. As both parties proceed on the basis of North
Carolina law, the court does not undertake such a comprehensive analysis.
      {58}   The elements of a Chapter 75 claim are well known and need not be
extensively discussed here. They include an unfair or deceptive act, in commerce,
which proximately causes injury. Bumpers v. Cmty. Bank of N. Va., 

,
87–88, 747 S.E.2s 220, 226 (2013). GSK here relies on a line of cases which
recognize on their particular facts that an “inequitable assertion of power or
position” can constitute an unfair and deceptive trade practice. E.g., Gray v. N.C.
Ins. Underwriting Ass’n, 

, 

 (2000). Likewise,
breaches of contract accompanied by egregious or aggravated circumstances may
give rise to an unfair and deceptive trade practice. E.g., Garlock v. Henson, 

, 

 (1993), but generally, a breach of contract
without such circumstances does not give rise to a separate claim for an unfair and
deceptive trade practice. Broussard v. Meineke Discount Muffler Shops. Inc., 

 (4th Cir. 1998). Chapter 75 claims are not intended to constrain a
party’s appropriate assertion of contract rights by raising them to the level of an
unfair and deceptive trade practice. Harris v. NCNB Nat. Bank of N.C., 

, 

 (1987).

                                    V.    ANALYSIS

      A. GSK’s Breach of Contract Claim

      {59}   GSK’s Motion focused on its right to payment for a Firm Order made
and accepted before termination, apparently believing that Dendreon had conceded
its obligation to pay Extension Fees for the two months within the requisite sixty
days’ notice of termination. Dendreon has contested any such obligation, in
response to which GSK contends that the court should determine that it is entitled
to both payment for the Firm Order and for the Extension Fees.
          1. Payment for a Firm Order of 700 Grams of Product

      {60}   The parties agree that Dendreon was entitled to and did terminate the
DSA pursuant to Sections 2.4(b) and 14.2(d) because Conformance Batches had not
commenced by September 1, 2011. GSK does not claim wrongful termination. The
dispute is rather what termination obligations arose.
      {61}   The Court has carefully and thoroughly considered the respective
contract interpretations, as New York directs. Having done so, the Court concludes
that the relevant contract terms are not ambiguous and may be enforced as a
matter of law, with no need for further proceedings to resolve uncontested issues of
material fact. As to each contract term the Court must construe, the Court finds
that only one of the tendered interpretations is reasonable. The Court concludes
that GSK is entitled to be paid for the Firm Order of 700 grams of Product but is not
entitled to Extension Fees.
      {62}   To determine GSK’s right to payment for a Firm Order of 700 grams of
Product, the Court must construe and apply DSA Sections 2.4 and 14.3(a)(6).
      {63}   Other payment provisions in Article 14 need not be considered.
Dendreon has not asserted GSK’s material breach as a ground for termination,
relying solely on termination pursuant to Section 2.4 which allows termination in
the event that Conformance Batches had not commenced before September 1, 2011.
No payment is required pursuant to DSA Section 14.3(a)(4), as payments under this
subsection are for “Product batches completed at the time of termination[,]” and
there are no such batches. No payment is required pursuant to DSA Section
14.3(a)(5), as payments under this subsection are for “Product batches that had
been initiated” as of the date of termination, and there are no such batches.
      {64}   Following Dendreon’s termination pursuant to Section 2.4, GSK is
then entitled to payment for Product pursuant to a Firm Order placed prior to
termination only if it is so entitled by DSA Section 14.3(a)(6). The contract
language requires the Court to determine first whether “Dendreon instruct[ed] GSK
to cease manufacture of Product, with respect to Firm Orders placed by Dendreon
prior to the effective date of termination[,]” and second, even if so, whether
Dendreon is nevertheless obligated to pay only for Product actually manufactured
and meeting Final Release specifications.
      {65}   There can be no serious dispute that there was a binding Firm Order of
700 grams of Product prior to the effective date of termination. This was the
eighteen-month forecast of each of the thirty-six-month forecasts Dendreon gave
immediately after the DSA Effective Date and last affirmed on August 22, 2011,
several days before it sent the Termination Letter on September 1, 2011. That
same 700 gram figure is incorporated into DSA Schedule 4.1.
      {66}   Section 14.3(a)(6) employs the term “manufacture,” which the DSA
does not define. Dendreon contends “manufacture” necessarily means actual
manufacture, which would occur no earlier than manufacture of Conformance
Batches in the Process Implementation Phase or more appropriately after the
Manufacture Phase had commenced. Based on this reasoning, Dendreon contends,
a binding Firm Order could be cancelled on and after September 1, 2011 so long as
Conformance Batches had not commenced. Essentially, the construction is that the
Firm Orders did not become binding in a manner for which a payment obligation
would mature until Product meeting Final Release specifications had occurred.
      {67}   GSK contends that “manufacture” has a much broader meaning, which
included efforts during the Process Implementation Phase, and further that the
DSA clearly and repeatedly recognizes that a Firm Order was “binding,” and could
not, therefore, be cancelled unilaterally with no consequence. GSK further contends
that the Firm Order became binding when accepted, and the express language of
Section 14.3(a)(6) clearly recognizes that GSK was excused from manufacturing
Product meeting Final Release specifications when it was instructed to cease efforts
toward such manufacture. That is, GSK contends that Section 14.3(a)(6) afforded
Dendreon the option to “take or pay,” meaning that it could take Product GSK
manufactured or pay GSK when exercising its option to direct GSK to cease such
manufacture.
      {68}   Construing all contract terms together, the Court accepts GSK’s
construction as reasonable and rejects Dendreon’s construction as unreasonable.
The Court concludes both that the term “manufacture” includes not only the actual
manufacture in the Manufacture Phase, but also efforts during the Process
Implementation Phase. Notwithstanding whether “manufacture” would begin prior
to commencing Conformance Batches, Dendreon clearly instructed GSK to cease
efforts for such manufacture, and the language of Section 14.3(a)(6) did not vest in
Dendreon the right to instruct that such efforts cease without further obligation
simply because that instruction preceded actual Product Manufacture. As the
Court also concludes that the Termination Letter instructed GSK to cease
manufacture, GSK’s right to payment for the Firm Order placed prior to
termination matured upon termination and any obligation GSK had to manufacture
Product meeting Final Release specifications was excused.
      {69}   The Termination Letter does not contain language that incants the
exact contract language of “instructs to cease manufacturing.” However, the
Termination Letter has exactly that effect. The letter unequivocally states that the
DSA has been terminated, that Dendreon considers all Firm Orders cancelled, and
that GSK was clearly to undertake no further efforts toward manufacture. GSK no
longer was licensed to use Dendreon’s processes and intellectual property. GSK
was, by Dendreon’s follow-up letter, instructed to return equipment, raw materials
and supplies.
      {70}   After termination, GSK was effectively unable to manufacture Product.
      {71}   The Court concludes that Dendreon, by its termination of the DSA, its
purported termination of the Firm Orders, its withdrawal of the license to use
Dendreon intellectual property, and its demand for return of raw material and
supplies, effectively instructed GSK to cease manufacture within the meaning of
DSA Section 14.3(a)(6).
      {72}   To construe the contract otherwise would be inconsistent with the
language of Section 14.3(a)(6) which clearly looks backward toward a Firm Order
that preceded termination, and the definition of a Firm Order which clearly became
binding almost immediately after the DSA Effective Date. The DSA keys the
necessary instruction to cease manufacture to “Firm Orders placed by Dendreon
prior to the effective date of termination or the date on which manufacture ceases
(as the case may be)[.]” (DSA § 14.3(a)(6).) The clause equally reaches a binding
Firm Order committed early in the Process Implementation Phase as well as to
subsequent Firm Orders that might be placed in the Manufacture Phase.
      {73}   It is clear that the parties did not include any provision that a binding
Firm Order could be cancelled and payment could be avoided if the Firm Order was
cancelled at a time prior to commencing Conformance Batches.
      {74}   The Court concludes that DSA Section 14.3(a)(6)’s use of the term
“manufacture” is not ambiguous. The Court should not imply a term the parties
neglected or chose not to include. Implying a term allowing for cancellation of a
binding Firm Order without payment liability would be inconsistent with other
express terms of the contract. In particular, it would render the term “binding”
ineffective and meaningless when applied to any Firm Order. Dendreon’s tendered
construction allowing it a right to cancel a binding Firm Order is unreasonable.
      {75}   The Termination Letter clearly instructed GSK to cease manufacture
and GSK is entitled to payment for the Firm Order of 700 grams of Product unless
the DSA conditions payment on having actually manufactured Product meeting
Final Release specifications. Of course, Dendreon instructed GSK to cease efforts to
manufacture any such product.
      {76}   In addition to the New York rules of construction noted above, the
Court is further guided by New York principles which preclude a party from relying
on a contract condition precedent when its own conduct prevents the opposing party
from performing that condition. A.H.A. Gen. Constr., Inc. v. N.Y. City Hous. Auth.,

 (1998). The chosen contract language of DSA Section 14.3(a)(6)
adheres to this principle, for it obligates GSK to proceed with manufacture unless it
is instructed to cease manufacture, in which event its further obligation to
manufacture is excused.
      {77}   Dendreon argues that allowing GSK to receive payment without
having actually manufactured Product ignores express language of Section
14.3(a)(6) which refers to payment of “one hundred percent (100%) of the then
applicable Price for the grams of Product specified in said Firm Orders and meet
Final Release Specifications.” (DSA § 14.3(a)(6) (emphasis added).) Dendreon would
continue to impose the obligation to meet Final Release specifications even when it
instructed GSK to cease manufacture, thereby making performance of the condition
precedent to payment impossible. Dendreon’s tendered construction would instead
ignore the express language which obligates GSK to continue to perform “unless
Dendreon instructs GSK in writing to cease manufacture of the grams of Product
specified in said Firm Orders.” (emphasis added).
      {78}   Dendreon’s tendered contract construction is unreasonable. The
language of DSA Section 14.3(a)(6) is not ambiguous. GSK was excused from
further performance when it was instructed to cease manufacture. Its right to
payment on the binding Firm Order of 700 grams of Product matured upon its
receipt of that instruction and the termination of the DSA. GSK’s right to payment
for the Firm Order of 700 grams of Product, made and accepted prior to
termination, was not and is not condition on manufacturing Product which meets
Final Release specifications.
      {79}   Dendreon had the right to elect to have GSK cease manufacture as of
September 1, 2011 when Conformance Batches had not commenced. However, upon
exercising that election, GSK became entitled to be paid the appropriate Price for
the Firm Order that was then binding. GSK is entitled to that payment.
      {80}   The Court has considered but rejects Dendreon’s argument that such
payment is both an unexpected windfall to GSK and an illegal penalty against
Dendreon. DSA Sections 2.4 and 14.3(a)(6) represent a reasonable contractual
allocation of rights between the parties. In exercising the right to terminate and to
instruct GSK to cease manufacture, Dendreon avoided substantial future expense.
GSK was limited to payment for binding Firm Orders which preceded termination.
      {81}   Dendreon is obligated to pay GSK the contract Price for the Firm
Order of 700 grams of Product.
      {82}   The Motions do not request the Court further to determine the Price
that must be paid for the Firm Order of 700 grams of Product. The Court does not
then do so. It need not construe the Price terms of the DSA. It need not further
consider whether Dendreon is entitled to an offset for savings GSK may have
enjoyed as a result of the instruction to cease manufacture. It need not consider
any other offset by reason on Dendreon’s counterclaims, concerning which GSK’s
later motion for summary judgment is not yet before the Court.
      {83}   To the extent that GSK’s Motion seeks summary judgment that it is
entitled to be paid on a Firm Order for 700 grams of Product, GSK’s Motion is
GRANTED. To the extent that Dendreon’s Cross-Motion seeks summary judgment
that it had the right to cancel that Firm Order and is not obligated to pay GSK for
that Firm Order, Dendreon’s Motion is DENIED.

         2. Payment of Extension Fees After Notice of Termination Period

      {84}   GSK contends that it is entitled to $4 million in Extension Fees
representing $2 million for each of the two months following notice of termination
on September 1, 2011. Dendreon’s Cross-Motion seeks summary judgment that
these Extension Fees are not owed. The Court concludes that Dendreon’s position
should be sustained.
      {85}   GSK contends that Dendreon itself recognized its obligation to pay
those Extension Fees when it terminated the DSA. It is clear that the Termination
Letter offered to pay $4 million of Extension Fees if GSK acquiesced that any
binding Firm Order preceding termination had been cancelled. GSK further asserts
that Dendreon’s corporate representatives made a binding admission of liability for
such Extension Fees. After careful review and consideration, the Court concludes
that GSK’s right should be instead be measured by the express contract language
and Dendreon has not made any binding admission of liability inconsistent with
that the contract terms.
      {86}   The Court looks to the clear contract language regarding the payment
of Extension Fees. The DSA provides that:
      [i]f a Delay Event occurs (as defined below) and Dendreon elects to
      have GSK continue efforts to implement the Process for a maximum of
      up to six (6) months, then Dendreon shall commence paying GSK a fee
      of two million dollars ($2,000,000) per month during such extension
      period (the “Extension Fee”).
(DSA § 2.4(a) (emphasis added).)
      {87}   The operative language is whether “Dendreon elects to have GSK
continue efforts to implement the Process” after August 1, 2011. Dendreon paid
GSK an Extension Fee for the month of August 2011. The question is whether it
must also pay Extension Fees for September and October 2011 after the notice of
termination on September 1, 2011.
      {88}   GSK has contended and the Court has accepted that the September 1,
2011 Termination Letter instructed GSK to cease manufacture within the meaning
of DSA Section 14.3(a)(6). The Court concludes that it would be inconsistent and
unfair to conclude that the same letter represented Dendreon’s election to have
GSK continue efforts to implement the Process. Having not so elected, Dendreon
was not obligated to make further Extension Fees.
      {89}   Unless Dendreon is deemed to have made a binding judicial admission
that it is obligated for a payment the contract does not require, which the Court has
determined it has not, GSK’s right to payment for Extension Fees for the months of
September and October 2011 would require a contract construction that Dendreon
was obligated for a minimum of two month’s Extension Fees simply because the
DSA remained effective during the required sixty-day period following notice of
termination. The Court finds this interpretation unreasonable and an effort to
imply a contract term that the parties had either elected or neglected to include.
The contract provided for an unqualified right to terminate if Conformance Batches
had not commenced b August 1, 2011. The DSA could have but did not provide
that such a termination triggered two months Extension Fees even if Dendreon
elected not to have GSK continue efforts to implement the Process.
      {90}   The Court concludes that the DSA’s provision regarding payment of
Extension Fees is not ambiguous.
      {91}   Dendreon’s conditional offer in the Termination Letter to pay
Extension Fees after notice of termination if GSK accepted Dendreon’s cancellation
of the Firm Order did not become a binding obligation to pay both Extension Fees
and for a binding Firm Order that had not been cancelled. Allowing GSK to receive
both Extension Fees and payment for the Firm Order of 700 grams of Product which
preceded termination would afford GSK a unexpected windfall not anticipated by
the contractual bargain between the parties.
      {92}   To the extent that Dendreon’s Motion seeks summary adjudication
that it is not obligated to pay Extension Fees as a part of its termination obligation,
Dendreon’s Motion is GRANTED. To the extent that GSK’s Motion can be read to
seek summary adjudication that it is entitled to such Extension Fees, GSK’s Motion
is DENIED.

      B. GSK’s Unfair and Deceptive Trade Practice Claim

      {93}   The Court’s determination that Dendreon was not obligated to pay
Extension Fees following its notice of termination is dispositive of GSK’s claim that
Dendreon unlawfully attempted to coerce GSK to surrender its contractual rights by
conditioning payment of Extension Fees that Dendreon knew that it owed. (Compl.
¶ 32.). The Court then must determine whether GSK is entitled to proceed on its
claim that it was deceived or that Dendreon acted unfairly in engaging in pretext or
making deceptive statements prior to terminating the DSA in order to reduce its
termination obligations. The essence of the argument is that Dendreon tried to
avoid or obfuscate its obligation to pay for the binding Firm Order which preceded
termination. It seems obvious that any such effort failed to deceive GSK or to lead
it to accept cancellation of the Firm Order.
      {94}   Nevertheless, GSK contends that material issues of fact preclude
summary adjudication of its claim. The Court disagrees.
      {95}   Dendreon’s representations that GSK contends were unfair or
deceptive appear limited to statements or concealments in the several days
immediately preceding the September 1, 2011 Termination Letter. More
specifically, GSK complains that the August 22, 2011 forecast was misleading and
knowingly false because Dendreon knew at the time it issued the forecast that it
would not need the Product as forecasted. Of course, it is precisely that Product for
which GSK seeks payment through its breach of contract claim.
      {96}   Even construing the record in GSK’s favor, the testimony and
documents indicate that any deception in which Dendreon may be said to engage
were close in time to the actual termination, and further at a time when other
public statements would lead GSK to recognize that Dendreon would not actually
require Product consistent with the forecast which it reaffirmed on August 22, 2011,
as evidenced by GSK’s own pleadings. The August 22, 2011 forecast simply carried
forward the same forecast that had been in place since the beginning of the DSA
and as reflected in Schedule 4.1 of the DSA. The asserted wrong is apparently that
Dendreon did not reduce its Firm Order and advise GSK that it was expecting to
terminate the DSA within a few weeks.
      {97}   The Court concludes first that these facts, even if accepted, do not
constitute aggravated facts adequate to elevate a breach of contract into an unfair
and deceptive trade practice, and further do not forecast evidence that GSK can
demonstrate any injury proximately caused by the conduct complained of,
particularly where the Court has afforded GSK the right of payment on the binding
Firm Order of 700 grams of Product.
      {98}   The Court concludes that GSK is not entitled to proceed on a claim of
unfair and deceptive trade practice which is grounded on the same facts as its
breach of contract claim without further demonstrating any aggravating
circumstances and without reasonably anticipated proof of any damage proximately
caused which is in addition to rather than duplicative of remedies afforded by the
breach of contract claim.
      {99}   Accordingly, to the extent that Dendreon’s Motion seeks summary
adjudication against GSK’s claim for unfair and deceptive trade practices pursuant
to 

, Dendreon’s Motion is GRANTED.
      C. GSK’s Claim for Breach of the Implied Covenant of Good Faith and Fair
         Dealing

      {100} The Court also concludes that the claim for breach of the implied
covenant of good faith and fair dealing rests on the same facts as the breach of
contract claim, and in light of the Court’s holding on the breach of contract claim
seeks no damage that is in addition to rather than duplicative of the breach of
contract claim. Pursuant to New York contract principles, the implied covenant
claim should not then further proceed.
      {101} To the extent that it seeks summary adjudication that GSK is not
entitled to proceed on its claim of a breach of the implied covenant of good faith and
fair dealing, Dendreon’s Motion is GRANTED.


                                VI.    CONCLUSION


      {102} For the reasons expressed above, it is ORDERED, ADJUDGED, and
DECREED that:
      1. GSK is entitled to be paid and Dendreon shall pay GSK for the binding
          Firm Order of 700 grams of Product pursuant to section 14.3(a)(6) of the
          DSA;
      2. GSK is not entitled to and Dendreon need not pay Extension Fees for the
          period between September 1, 2011 and October 31, 2011 pursuant to
          Section 2.4(a) of the DSA;
      3. GSK’s claim for unfair and deceptive trade practices pursuant to 

 is DISMISSED;
      4. GSK’s claim for breach of the implied warranty of good faith and fair
          dealing is DISMISSED;
      5. GSK’s Motion to the extent that it seeks summary adjudication that
          Dendreon has breached the DSA by its purported cancellation and failure
          to pay pursuant to the Firm Order is GRANTED;
6. Dendreon’s Motion to the extent that it seeks summary adjudication that
   its termination obligations do not require the payment of Extension Fees
   is GRANTED; and
7. Except as expressly GRANTED, GSK’s Motion and Dendreon’s Motions
   are DENIED.


This the 4th day of November, 2014.