Aronowitz v. Health-Chem Corp.

513 F.3d 1229, 85 U.S.P.Q. 2d (BNA) 1604, 2008 U.S. App. LEXIS 784, 2008 WL 123790
CourtCourt of Appeals for the Eleventh Circuit
DecidedJanuary 15, 2008
Docket06-11344
StatusPublished
Cited by50 cases

This text of 513 F.3d 1229 (Aronowitz v. Health-Chem Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eleventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Aronowitz v. Health-Chem Corp., 513 F.3d 1229, 85 U.S.P.Q. 2d (BNA) 1604, 2008 U.S. App. LEXIS 784, 2008 WL 123790 (11th Cir. 2008).

Opinions

[1233]*1233PER CURIAM:

Plaintiffs-counter defendants-appellants, Jack Aronowitz, Health-Chem Diagnostics LLC, and Leon Services LLC (collectively “Aronowitz”),1 appeal an “Omnibus Order” by the district court for the Southern District of Florida addressing a number of post-trial motions. The order (1) set aside the jury verdict that had been rendered in Aronowitz’s favor as to his first breach of contract claim against defendant-counter claimant-appellee Health-Chem Corporation (“Health-Chem”); (2) reduced the damages awarded with respect to the second breach of contract claim against. Health-Chem from $2.6 million to nominal damages of $1; (3) upheld the jury’s verdict against Aronowitz on Health-Chem’s counterclaim for trademark infringement; and (4) conditionally granted a new trial to Health-Chem in the event the court’s primary rulings were reversed. We AFFIRM in part, REVERSE in part, and REMAND for a new trial as to damages for breach of the 2003 contract.

I. BACKGROUND

This appeal arises out of a business dispute between Health-Chem, a company that manufactures transdermal pharmaceutical patches, and Aronowitz, an inventor of diagnostic medical products. In 2002, the parties signed three agreements, a Master Agreement, a License Agreement, and a Security Agreement (collectively “2002 Contract”), by which they agreed to enter into a joint venture for the marketing and development of one of Aro-nowitz’s inventions, the “TD Glucose” patch, a transdermal patch that takes a diabetic’s glucose reading without having to draw blood. Under the 2002 Contract, Health-Chem agreed to provide $10,000 per month in funding to Aronowitz to help develop the patch at Health-Chem’s Diagnostic Division research facility and to employ him there as a director and consultant.2 Health-Chem also agreed to pay a licensing fee to Aronowitz for rights in his diagnostic products, including an up-front licensing fee of approximately $233,000 for the first three months. The 2002 Contract also gave Health-Chem an option eventually to buy the rights to the TD Glucose patch.

After a series of disputes over money owed under the 2002 Contract, and sensing that the venture was not working out, the parties met and negotiated a new arrangement in 2003 “in order that [Health-Chem could] cease further funding of its Diagnostic Division and that [Aronowitz could] assume financial responsibility and management direction of [the TD Glucose development business], with minimum interruption to the operations.” Rl-31, Exh. G at 1. Under the new arrangement, the parties agreed that Aronowitz’s employment with Health-Chem would cease and that he would create a new business entity to develop the TD Glucose patch. The parties also agreed to the assignment of the 2002 Contract to the new entity such as to “terminate all obligations and stipulations of [the 2002 contracts] between Aro-nowitz and Health-Chem Corporation,” as of the date of the agreement and to have the new entity assume them. Id. at 2. The contract further provided that

If the assignment of the [2002] Contract, as described above, is not performed, nevertheless the parties agree to terminate all financial obligations of [Health-[1234]*1234Chem Corporation] to [Aronowitz and his business entities] as of the above date of this Agreement, including ... specifically, but not exclusively, ceasing all financial obligations of Health-Chem Corporation with regard to the Diagnostic Division.

Id. Although the new agreement terminated Health-Chem’s obligation to provide monthly funding for the development of the TD Glucose patch, Health-Chem did agree to provide certain supplies and equipment to Aronowitz — most notably “Weiss wands,” which were necessary to perform the clinical trials. Id. at 4. The parties also agreed to a “Cut-off Payments and Expenses” provision which allocated certain specific expenses and provided that “[a]ny expenses not [specifically listed would] become the responsibility of the party to whom the goods or services were delivered based on the date of delivery.” Id. at 3. Under this provision, Health-Chem was responsible for any goods or services delivered prior to execution of the 2003 contract and Aronowitz was responsible for any unlisted goods or services delivered thereafter.

The 2003 contract also granted Aronow-itz’s new entity a limited license to use the trademark “Health-Chem Diagnostics” in connection with its TD Glucose patch development. Such use was to be limited to the new entity’s company “name and literature.” Id. Finally, under the 2003 contract, Health-Chem retained an option to purchase the rights to the, TD Glucose patch, and Aronowitz was guaranteed five percent of net sales.

Within two weeks of its execution, disputes arose between the parties over the provisions of the 2003 contract. Aronowitz alleged that Health-Chem had failed to pay the electricity bill at the now transferred Diagnostic Division research facility and that the power was going to be cut off; he also alleged that Health-Chem had failed to provide him with the Weiss wands. Aronowitz asserted that Health-Chem’s conduct entitled him to cancel its option on the TD Glucose patch.

In June 2004, Aronowitz filed suit against Health-Chem. In an amended complaint, he alleged two separate counts of breach of contract: one for the 2002 Contract and one for the 2003 contract. Health-Chem raised, inter alia, the defense of novation with respect to the 2002 Contract, arguing that the 2003 agreement superseded the 2002 agreement and nullified any possible claim for breach. Health-Chem also initiated a counterclaim against Aronowitz for trademark infringement, alleging that Aronowitz had used the more general two-word mark “Health-Chem” without its permission. A jury trial was held in October 2005. At the close of Aronowitz’s case, Health-Chem moved for judgment as a matter of law on two grounds: first, that the 2003 contract effectuated a novation of the 2002 Contract, thereby eliminating any claim for breach of the 2002 Contract; and, second, that Aronowitz’s claimed damages for lost profits under the 2003 contract were too speculative. The trial court “grudgingly” denied the motion.3 R10 at 45. Health-Chem renewed its motion at the close of all of the evidence. The court again denied the motion, this time stating that it was “concerned about the effect that the 2003 agreement had on the 2002 agreement, but [1235]*1235[was] not going to prevent the jury at this point from considering it.” R17 at 175. Aronowitz moved for judgment as a matter of law on the trademark infringement claim; the court also denied that motion.

Just prior to closing arguments and jury instruction, Health-Chem proposed two alternative amended verdict forms. The first, which omitted any mention of breach as to the 2002 Contract, would have been applicable had the court granted judgment as a matter of law on the issue of novation. The second began by asking the jury to decide whether the 2002 Contract had been superseded by the 2003 contract. The court ruled against use of either of the proposed forms.

The jury returned a verdict in favor of Aronowitz as to each breach of contract claim. Specifically, it awarded damages of $331,000 as to breach of the 2002 Contract and $2.6 million as to breach of the 2003 contract.

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513 F.3d 1229, 85 U.S.P.Q. 2d (BNA) 1604, 2008 U.S. App. LEXIS 784, 2008 WL 123790, Counsel Stack Legal Research, https://law.counselstack.com/opinion/aronowitz-v-health-chem-corp-ca11-2008.