SIGA Techs., Inc. v. Pharmathene, Inc.

SIGA Techs., Inc. v. Pharmathene, Inc.

Opinion

 [*1110]  SEITZ, Justice, for the Majority:

I. INTRODUCTION

This is the second appeal by SIGA Technologies, Inc. ("SIGA") from a Court of Chancery judgment awarding PharmAthene, Inc. ("PharmAthene") damages stemming from failed merger and license negotiations between the parties. In the first appeal, this Court upheld the Court of Chancery's finding that SIGA in bad faith breached its contractual obligation to negotiate a license agreement consistent with the parties' license agreement term sheet, known throughout this litigation as [**2]  the "LATS." This Court also held that where parties have agreed to negotiate in good faith, and would have reached an agreement but for the defendant's bad faith conduct during the negotiations, the plaintiff can recover contract expectation damages, so long as the plaintiff can prove damages with reasonable certainty. Because the Court of Chancery ruled out expectation damages in its first decision, this Court remanded the case to reconsider an award of damages to SIGA in a decision we will call "SIGA I."¹

The Court of Chancery did as instructed and reevaluated the evidence, including evidence of expectation damages. Although the court previously found that lump-sum expectation damages were too speculative to recover, the Court of Chancery held on remand that PharmAthene met its burden of proving with reasonable certainty expectation damages and awarded PharmAthene $113 million.² The parties once again appealed to this Court.

SIGA raises essentially two claims of error in the current appeal: first, the Court of Chancery was not free to reconsider its prior holding that lump-sum expectation damages were too speculative; and, second, [**3]  if reconsideration was permitted, the expectation damages awarded following remand were too speculative. After careful consideration of SIGA's arguments, we find that the law of the case doctrine did not preclude the Court of Chancery from reconsidering its earlier determination that lump-sum expectation damages were too speculative. In SIGA I, this Court clarified that expectation damages were available, instructed the Court of Chancery to revisit its damages award, directed the trial court to reevaluate the helpfulness of expert testimony, and permitted the court to make any order in further progress of the case not inconsistent with the SIGA I decision. The Court of Chancery followed the law of the  [*1111]  case by complying with the mandate in SIGA I.

We also find that the court did not abuse its discretion when it awarded PharmAthene lump-sum expectation damages, and its factual findings supporting its new damages determination were not clearly erroneous. The Court of Chancery considered anew all issues relevant to the remedy, including the uncertainty caused by the wrongdoer's breach. ] When a party breaches a contract, that party often creates a course of events that is different from those [**4]  that would have transpired absent the breach. The breaching party cannot avoid responsibility for making the other party whole simply by arguing that expectation damages based on lost profits are speculative because they come from an uncertain world created by the wrongdoer. Rather, when a contract is breached, expectation damages can be established as long as the plaintiff can prove the fact of damages with reasonable certainty. The amount of damages can be an estimate.³ When awarding lump-sum expectation damages for breach of a Type II contract, the Court of Chancery correctly took into account all the circumstances of the breach, including the wrongdoer's willfulness,⁴ especially when the wrongdoer caused uncertainty about the economic terms of the transaction by its failure to negotiate in good faith.⁵ Accordingly, we affirm the judgment of the Court of Chancery.

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