Elorac, Inc. v. Henson et alMOTIONN.D. Ill.April 25, 2019 4850-4932-9301.1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ELORAC, INC., Plaintiff, v. RICK HENSON; KMM PHARMACEUTICALS, LLC; STAYMA CONSULTING SERVICES, LLC; MISSION PHARMACAL COMPANY; AND BIOCOMP PHARMA, INC., Defendants. Case No.: 1:16-cv-11522 Hon. Harry D. Leinenweber DEFENDANT BIOCOMP PHARMA, INC.’S MOTION FOR ATTORNEYS’ FEES AND EXPENSES PURSUANT TO FED. R. CIV. P. 54 BioComp Pharma, Inc. (“BioComp”) files this Motion for Attorneys’ Fees and Expenses by joining the Motion filed by Defendants Rick Henson (“Henson”), Stayma Consulting Services, LLC (“Stayma”), and KMM Pharmaceuticals, LLC (“KMM”) (the “KMM Defendants”) (Dkt. 231), and respectfully provides the following additional support for its Motion: 1. On December 21, 2016, Plaintiff first filed suit against the KMM Defendants. (Dkt. 1.) 2. Subsequently, on February 2, 2017, Plaintiff filed its Amended Complaint and added BioComp Pharma, Inc. as an additional defendant, asserting that BioComp may have been involved in the manufacture of the KMM Product, as well as labelling and holding out the KMM Product as a generic equivalent. Plaintiff alleged the KMM Product is not a generic equivalent to Plaintiff’s UltraSal-ER product and asserted multiple causes of actions and damages due to the alleged false labelling and advertising claim against BioComp and the KMM Defendants. (See Dkt. 26.) At that time, Plaintiff was first represented by the law firm Barnes & Thornburg, LLP. Case: 1:16-cv-11522 Document #: 234 Filed: 04/25/19 Page 1 of 9 PageID #:3692 2 3. Plaintiff alleged in its Amended Complaint that “[o]ne way that the KMM Defendants distribute the KMM Product is through BioComp, Inc.” (Id. at ¶ 3.) Aside from the distribution allegation, Plaintiff speculated that BioComp was involved in the manufacturing, marketing, re-selling, and shipping of the KMM Product in order to improperly link BioComp with the KMM Defendants and the alleged bad acts, such as false labeling. (See id. at ¶¶ 3-4.) 4. Shortly after BioComp was added as a party, counsel for BioComp communicated with Plaintiff’s counsel and explained that BioComp had no involvement in the manufacture or labeling of the KMM product. (Ex. A, Declaration of J. Daniel Harkins (“Harkins”) at ¶ 2.) Instead, BioComp merely distributed the KMM product pursuant to a Consignment and Distribution Agreement. (Id.) On February 28, 2017, counsel for BioComp provided Plaintiff’s counsel with a copy of the Consignment and Distribution Agreement which showed that BioComp had no involvement regarding the manufacturing or labeling of the KMM product. (Id. at ¶ 3.) Since BioComp had no involvement with labeling of the KMM product, it cannot be found liable for making a false statement of fact about the KMM product nor for false advertising within the Lanham Act. See Outlaw Lab., LP v. Shenoor Enter., No. 3:18-CV-2299-B, 2019 U.S. Dist. LEXIS 34364, at *28-29 (N.D. Tex. March 4, 2019) (stating that federal courts “appear unwilling to entertain false-advertising claims that are based entirely on false statements that originate with third parties” in a case involving a product allegedly sold by a retailer with third party’s false label). 5. Moreover, on April 10, 2017, Defendant BioComp served its Responses to Plaintiff’s First Set of Interrogatories which disclosed that BioComp’s only involvement with the KMM Product was distribution of the product. (Harkins at ¶ 4, Ex.1.) BioComp again verified that BioComp had no involvement regarding labeling of the KMM Product, and produced a copy Case: 1:16-cv-11522 Document #: 234 Filed: 04/25/19 Page 2 of 9 PageID #:3693 3 of the Agreement to Plaintiff, marked as BIOCOMP0000001-14, in which BioComp agreed to only take “consignment, warehouse, and distribute the KMM Product.” (Id. at ¶ 5, Ex. 1.) 6. Although Plaintiff was aware as early as February 28, 2017, less than a month after adding Defendant BioComp to the lawsuit, that BioComp merely distributed the KMM Product in accordance with a Consignment and Distribution Agreement, Plaintiff refused to dismiss BioComp from the lawsuit. Instead, Plaintiff embarked on an extensive litigation campaign, including extensive electronic discovery, which significantly increased BioComp’s legal expenses. (See Decl. Fees at ¶ 13.) 7. After months of extensive discovery and hearings on a Motion for Preliminary Injunction, on September 8, 2017, counsel for Plaintiff abruptly filed its Motion to Withdraw as counsel for Plaintiff, which Motion was granted on or about September 15, 2017. (Dkts. 152, 157.) The case was then put on hold until Plaintiff was able to retain new counsel, who filed an appearance on December 7, 2017. 8. Instead of properly dismissing BioComp from the lawsuit, Plaintiff’s new counsel filed a Second Amended Complaint on January 19, 2018 (Dkt. 174) and continued to assert the same claims against BioComp plus asserted an additional breach of contract claim against BioComp.1 Although BioComp is not a party to the Confidential Disclosure Agreement (“NDA”) at issue in the Second Amended Complaint (see Id., Ex. 5), Plaintiff simply asserts that because BioComp is a subsidiary of Mission Pharmacal Company, it should be a party to the breach of contract claim. 1 Mission was also named as an additional defendant to the lawsuit and Plaintiff’s asserted the same breach of contract against Mission in the Second Amended Complaint. Mission will be filing its own Motion for Attorneys’ Fees and Expenses under Fed. R. Civ. P. 54 prior to the hearing scheduled on April 30, 2019 (Dkt. 232). Case: 1:16-cv-11522 Document #: 234 Filed: 04/25/19 Page 3 of 9 PageID #:3694 4 9. Moreover, instead of relying on the extensive discovery already obtained by Plaintiff’s first counsel, Plaintiff’s new counsel insisted on conducting additional discovery, including new sets of Interrogatories and Requests for Production, and insisted on conducting extensive electronic discovery. (Harkins at ¶ 6.) Although the deposition of the 30(b)(6) Corporate Representative of Plaintiff was scheduled for late August 2018, Plaintiff pushed to postpone the deposition to allow the parties to attend a Settlement Conference with Judge Valdez. (Harkins at ¶ 7.) 10. On November 2, 2018, Plaintiff submitted its Pre-Settlement Conference Letter which laid out its evidence and legal principles against all Defendants, including BioComp. (Harkins at ¶ 8.) As to Plaintiff’s false advertising claim, Plaintiff failed to provide any evidence or a single statement relating to BioComp. (Id. at ¶ 8.) As to Plaintiff’s breach of contract claim, Plaintiff merely stated “Defendant BioComp, wholly owned by Defendant Mission, is the exclusive distributor of the KMM Product” then mentioned overlapping employment between BioComp and KMM Defendants as Plaintiff’s evidence to support its breach of contract claim against BioComp. (Id.) 11. On December 19, 2018, BioComp’s President and its counsel travelled to Chicago to attend the Settlement Conference with Judge Valdez, in a good faith effort to resolve the dispute. Again, at the Settlement Conference, Plaintiff was unable to identify any evidence to support its claims against BioComp. (Id. at ¶ 9.) 12. Thus, after almost two years of extensive discovery and litigation, Plaintiff has not identified any evidence to support any of its allegations that BioComp had any involvement in the development, manufacture, advertising, or labeling of the KMM Product, or received and disclosed Case: 1:16-cv-11522 Document #: 234 Filed: 04/25/19 Page 4 of 9 PageID #:3695 5 any confidential information of Plaintiff’s in breach of the NDA for which BioComp was not even a party. 13. Then, on February 4, 2019, Plaintiff’s second set of litigation counsel abruptly filed their Motion to Withdraw as counsel for Plaintiff, which Motion was granted on or about February 7, 2019. (Dkt. 228.) The case was then put on hold and Plaintiff was ordered to retain new counsel by March 12, 2019. Since Plaintiff failed to retain new counsel, the Court ordered the case dismissed for want of prosecution on March 19, 2019 (Dkt. 230). 14. Below is a summary of the above facts which reflect that Plaintiff’s continued aggressive litigation efforts and assertion of baseless claims against Defendant BioComp for nearly two years were in bad faith, making this an exceptional case. Plaintiff’s Litigation Efforts BioComp’s Response Month 1 (Dec. 2016) * Suit Filed Against KMM Defendants - 12/21/16 KMM Defendants sued. - Allegations include Lanham Act (false labeling) and Illinois Consumer Fraud. Month 3 (Feb. 2017) * BioComp Added * Informal Discovery - 2/2/17 BioComp sued for same claims as KMM Defendants. - Plaintiff was notified BioComp not involved in manufacture or labeling. - 2/28/17 BioComp’s counsel provided copy of Consignment and Distribution Agreement to Plaintiff’s counsel. Months 4-9 (Mar./Aug. 2017) * Formal Discovery - Plaintiff served its First Discovery Requests. - Various Hearings - Several Depositions - Extensive Electronic Discovery - 4/10/17 BioComp served its verified interrogatory responses which state BioComp had no labeling involvement, merely distribute the KMM product. Produced Consignment and Distribution Agreement. Month 10-12 (Sep./Nov. 2017) - 9/8/17 Plaintiff’s Counsel files Motion to Withdraw. Case: 1:16-cv-11522 Document #: 234 Filed: 04/25/19 Page 5 of 9 PageID #:3696 6 Plaintiff’s Litigation Efforts BioComp’s Response * Withdrawal of Plaintiff’s First Counsel * Case Effectively “Stayed” - 9/15/17 Withdraw Motion Granted. Month 13 (Dec. 2017) * New Counsel for Plaintiff - 12/7/17 New counsel for Plaintiff filed appearance. - Month 14 (Jan. 2018) *Second Amended Complaint Filed with New Counsel. - 01/19/18 Second Amended Complaint filed and additional claim of breach of confidentiality agreement (“NDA”) asserted against BioComp and new Defendant Mission Pharmacal Company. - Complaint had copy of NDA attached as exhibit which shows BioComp not a party - Month 15-21 (Feb./Aug. 2018) *Plaintiff’s Second Counsel pushes for Settlement Conference. - Discovery Continues - Plaintiff postpones its Plaintiff 30(b)(6) depo and pushes for Settlement Conference - Defense counsel notices 30(b)(6) of Plaintiff Month 22-25 (Sep./Dec. 2018) *Parties prepare for/attend Settlement Conference. - Plaintiff prepares Pre-Settlement letter and does not identify evidence against BioComp to support false advertising allegations. - Parties attend Settlement Conference in Chicago, IL. - Defendant prepares Pre- Settlement Letter. - Parties attend Settlement Conference in Chicago, IL. Month 27 (Feb. 2019) * Withdrawal of Plaintiff’s Second Counsel. * Case Effectively “Stayed” - 2/4/19 Plaintiff’s Second Counsel files Motion to Withdraw. - 2/7/19 Withdraw Motion Granted. - Defendant files Response to Motion to Withdraw which contains history of case and adverse impact on BioComp. (Dkt. 226) Month 28 (March 2019) * Case Dismissed for Want of Prosecution (Dkt. 230) Case: 1:16-cv-11522 Document #: 234 Filed: 04/25/19 Page 6 of 9 PageID #:3697 7 15. BioComp incurred $ 254,702.50 in legal fees and $ 17,443.68 in legal expenses in defense of this lawsuit. (Decl. Fees at ¶ 13.) In its answer, BioComp requested an award for attorneys’ fees and applicable costs to the extent permitted by law, including pursuant to the “exceptional case” doctrine of 15 U.S.C. § 1117(a), and believes an award for attorneys’ fees and applicable costs is just. (See Dkt. 188; see also Dkt. 231 (providing legal arguments to support claim of “exceptional case” doctrine of 15 U.S.C. § 1117(a) and award of attorneys’ fees and costs.)) BioComp is a prevailing party since the Court dismissed the case for want of prosecution. Additionally, Plaintiff maintaining its false advertising allegations during nearly two years of aggressive litigation after receiving immediate and repeated notice that BioComp was merely a distributor for the KMM product and, therefore, not involved in its manufacture, advertising or labelling, plus Plaintiff’s failure to provide any evidence against BioComp to support its allegations in Plaintiff’s Pre-Settlement Letter on November 2, 2018 demonstrates that this is an exceptional case. In addition, Plaintiff had both subjective and objective bad faith in maintaining its claims against BioComp, which supports an award under Fed. R. Civ. P. 11. See generally Quad, Inc. v. ALN Assocs., No. 88-CV-2246, 1990 U.S. Dist. LEXIS 7458, at *4-6 (N.D. Ill. June 18, 1990). WHEREFORE, PREMISES CONSIDERED, Defendant BioComp requests that the Court grant Defendant BioComp Pharma, Inc.’s Motion for Attorney Fees and Expenses Pursuant to Fed. R. Civ. P. 54. Case: 1:16-cv-11522 Document #: 234 Filed: 04/25/19 Page 7 of 9 PageID #:3698 8 Dated: April 25, 2019 Respectfully submitted, /s/ J. Daniel Harkins J. Daniel Harkins (Admitted Pro Hac Vice) Michael P. Adams Sherri Wilson (Admitted Pro Hac Vice) DYKEMA GOSSETT PLLC 112 E. Pecan Street, Suite 1800 San Antonio, Texas 78205 Telephone: (210) 554-5500 Facsimile: (210) 226-8395 Email: dharkins@dykema.com madams@dykema.com swilson@dykema.com Steven Zeller DYKEMA GOSSETT PLLC 10 S. Wacker Drive Suite 2300 Chicago, IL 60606 Telephone: (312) 876-1700 Facsimile: (312) 876-1155 Email: szeller@dykema.com ATTORNEYS FOR DEFENDANTS, MISSION PHARMACAL COMPANY and BIOCOMP PHARMA, INC. Case: 1:16-cv-11522 Document #: 234 Filed: 04/25/19 Page 8 of 9 PageID #:3699 9 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the above and foregoing document has been served on April 25, 2019 to all counsel of record who are deemed to have consented to electronic service via the Court's CM/ECF system. Additionally, the above and foregoing document has been served on Joel Bernstein and Jeffrey Bernstein on April 25, 2019 at the following addresses: Joel E. Bernstein joel@eloracpharma.com Elorac, Inc. 100 Fairway Drive Vernon Hills, IL 60061 Jeffrey R. Bernstein JBernstein@eloracpharma.com Elorac, Inc. 100 Fairway Drive Vernon Hills, IL 60061 /s/ J. Daniel Harkins J. Daniel Harkins Case: 1:16-cv-11522 Document #: 234 Filed: 04/25/19 Page 9 of 9 PageID #:3700