Promissory estoppel does not apply where a fully integrated, enforceable contract governs the promise at issue.
SIGA acquired an antiviral drug for the treatment of smallpox, ST-246. At that time, the drug's viability, potential uses, safety, and efficacy were all unknown, but the drug had enormous potential. By late 2005, SIGA had experienced difficulty developing the drug and was running out of money. As a result of SIGA's difficulties, SIGA's management began discussing a possible collaboration with PharmAthene. On March 20, 2006, SIGA and PharmAthene entered into a Bridge Loan Agreement in which PharmAthene loaned SIGA $3 million for expenses relating to the merger, developing ST—246, and overhead. The Bridge Loan Agreement designates New York law as its governing law. It also specifically contemplates that the parties might not ultimately agree on either a merger or a license agreement. Bridge Loan Agreement Section 2.3 obligates the parties to negotiate in good faith a license agreement in accordance with the terms of the LATS if the merger is terminated. On June 8, 2006, PharmAthene and SIGA signed the Merger Agreement, which selects Delaware law as its choice of law. Merger Agreement Section 12.3 is substantively identical to Bridge Loan Agreement Section 2.3 and provides that if the merger is terminated, the parties agree to negotiate in good faith a definitive license agreement in accordance with the LATS's terms. However, Several comments by SIGA representatives indicate that SIGA began experiencing seller's remorse after SIGA received a $5.4-million-dollar grant from the National Institutes of Health. Siga eventually terminated Merger Agreement. Meanwhile, as the Vice Chancellor found, SIGA had internally discussed alternative structures for a definitive license agreement. SIGA's controller emailed Konatich and several other SIGA representatives a financial analysis concluding that total past and future development costs equaled $36.66 million, and that a $40 million upfront license fee would support a 50-50 profit split. Olstein and Coch exchanged letters discussing SIGA's Draft LLC Agreement throughout November and December. Olstein asserted that the Agreement's terms were "radically different from the terms set forth in the [LATS]," but that PharmAthene was "willing to consider" changes to the LATS, including a 50/50 profit split. SIGA disputed that the LATS was binding because of the "Non Binding Terms" footer, and it never addressed PharmAthene's proposed profit split. Coch issued an ultimatum on December 12: unless PharmAthene responded by December 20 that it was prepared to negotiate "without preconditions" regarding the LATS's binding nature, the parties had "nothing more to talk about." On December 20, 2006, PharmAthene filed suit in the Court of Chancery.
Is SIGA liable under the doctrine of promissory estoppel?
The court found that because the merger agreement occurred later in time and encompassed the activity that lay at the heart of the case, that Delaware law would apply. Appellant breached its contractual obligation to negotiate in good faith, as an express contractual obligation to negotiate in good faith was binding on the contracting parties. A claim based on promissory estoppel could not lie, as the promise to negotiate in good faith for a definitive license agreement was expressly included in both the bridge loan and merger agreements, and the lower court had to look to the contract as the source of a remedy on the breach of an obligation to negotiate in good faith. Because it was unclear to what extent the lower court based his damages award upon a promissory estoppel holding, the damages award was found to be improper.