The General Hospital Corporation v. Esoterix Genetic Laboratories, LLC

• Court: Court of Appeals for the First Circuit
• Decided: October 21, 2021
• Docket: 20-2126
• Status: Unknown

Opinion

United States Court of Appeals For the First Circuit

Nos. 20-2126 20-2149

THE GENERAL HOSPITAL CORPORATION; DANA-FARBER CANCER INSTITUTE, INC.,

Plaintiffs, Appellees/Cross-Appellants,

v.

ESOTERIX GENETIC LABORATORIES, LLC,

Defendant, Appellant/Cross-Appellee,

LABORATORY CORPORATION OF AMERICA HOLDINGS, a/k/a Laboratory Corporation of America,

Defendant, Cross-Appellee.

APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Indira Talwani, U.S. District Judge]

Before

Lynch, Selya, and Barron, Circuit Judges.

Christopher R. Howe, with whom Campbell Conroy & O'Neil, P.C., Robert I. Steiner, Jaclyn M. Metzinger, and Kelley Drye & Warren LLP were on brief, for defendants. Douglas J. Nash, with whom Carolyn M. Crowley and Barclay Damon LLP were on brief, for plaintiffs. October 7, 2021 SELYA, Circuit Judge. Although these appeals arise out

of a dispute between sophisticated entities concerning

intellectual-property rights, they turn on abecedarian principles

of contract law. Those principles, though familiar, are often

difficult to apply. Because the court below erred in applying the

pertinent principles to the documents at hand, we vacate its

million-dollar-plus damages award and certain of its other

rulings, and we remand for further proceedings consistent with

this opinion.

I. BACKGROUND

We start by rehearsing the relevant facts and travel of

the case. The plaintiffs, The General Hospital Corporation and

Dana-Farber Cancer Institute, Inc. (collectively, the Hospitals),

own patents related to the detection of the epidermal growth factor

receptor (EGFR) mutation that, when present, suggests that certain

cancer treatments are likely to be effective. In 2005, the

Hospitals licensed the patents to a company that was in the

genetic-testing business. Under the master license agreement (the

License), the licensee is permitted to use and sell certain

products and processes covered by the EGFR-detection patents, as

well as to sublicense those same rights to third parties. In

exchange, the licensee is required to pay stipulated amounts,

including an annual license fee, royalties on its use and sales of

the processes and products, and a portion of the fees and other

- 3 - income received from sublicensees (including their royalty

payments).

Approximately five years later, the prior licensee's

rights were passed on to one of the defendants, Laboratory

Corporation of America Holdings (LabCorp), when LabCorp purchased

most of the seller's genetic-testing business. The rights later

passed to defendant Esoterix Genetic Laboratories, LLC (Esoterix)

— an entity created by LabCorp to manage the assets.

According to the License, royalties and sublicensing

fees and income are to be paid twice a year following six-month

reporting periods ending on June 30 and December 31. The License

delineates how these payments are to be computed. Royalties owed

on sales of processes, for example, are calculated by multiplying

a "royalty rate" by the "CONTRACT NET SALES," as defined, of

processes sold during a reporting period. Though simple on its

face, this calculation requires further computation to determine

the inputs. Payments owed for sublicensing arrangements are

calculated more straightforwardly: Esoterix owes the Hospitals a

fixed percentage of certain fees or income collected from

sublicensees.

In 2014, Esoterix sued QIAGEN Manchester, Ltd. and other

related entities (collectively, QIAGEN), for, inter alia, breach

of a sublicense anent the EGFR-detection patents. QIAGEN filed

counterclaims challenging the patents' validity. Esoterix and

- 4 - LabCorp eventually settled all claims with QIAGEN. They also

agreed to pay the Hospitals a portion of the settlement amount

paid by QIAGEN. The parties entered into a settlement agreement

to this effect on June 27, 2017.1 Section 3.1 of the settlement

agreement comprised a broad release, which was effective as of the

date of execution of the agreement. In it, the Hospitals released

Esoterix and LabCorp:

of, from, and with respect to, any and all liabilities, losses, damages, charges, complaints, claims, counterclaims, obligations, promises, agreements, controversies, actions, causes of action, suits, rights, demands, costs, debts and expenses (including attorneys' fees and court costs) of any nature whatsoever, known or unknown, suspected or unsuspected that may have arisen before the Effective Date, which [the Hospitals] may have, own or hold, or claim to have, own or hold against [Esoterix and LabCorp], relating to or arising from (i) the acts or omissions that were stated in, arose out of, or which may have arisen out of, the [prior litigation], (ii) the Patent Rights; (iii) the [License], including but not limited to the provision of any notice(s) required under the [License] or the payment of any past royalties or other fees pursuant to the [License] . . . .

Under the terms of the License, a reporting period closed

on June 30, 2017 (a few days after the effective date of the

1 In the sealed record, both the License and the settlement agreement are in redacted form. The parties confirmed at oral argument that the redacted versions contain all of the provisions that bear on this dispute and that the omitted portions are not material to our decision.

- 5 - release). Esoterix's royalties and sublicensing payments, along

with a semi-annual royalty report, were due within forty-five days

thereafter. Esoterix took the position that the release operated

to discharge the payment obligations for all uses and sales that

occurred before June 27. Accordingly, its report for that

reporting period supplied revenue and royalty information only for

the period between June 28 and June 30.2 The payments owed for

those few days were defrayed by application of Esoterix's annual

license fee, an offset that was permissible under the License.

Unwilling to turn the other cheek, the Hospitals brought

suit in a Massachusetts state court. Noting the existence of

diversity jurisdiction, the defendants removed the action to the

United States District Court for the District of Massachusetts.

See 28 U.S.C. §§ 1332(a), 1441. The Hospitals alleged, among other

things, that Esoterix and LabCorp violated the terms of the License

by failing to pay amounts owed for the entire reporting period

ending June 30, 2017. Soon after removal, the defendants moved to

dismiss. See Fed. R. Civ. P. 12(b)(6). The Hospitals opposed

that motion and went on the offensive, filing a motion for partial

summary judgment on their breach of contract claim.

2 The release is plain that it operates to wipe out matters arising before — and not on or before — June 27. We thus assume that the report did not contain royalty information for June 27 because there was none to report.

- 6 - The district court consolidated these motions for

hearing. Thereafter, the court granted the Hospitals' partial

summary judgment motion, concluding that Esoterix had not been

released from its obligation to pay royalties and sublicensing

fees for uses and sales occurring before June 27.3 See Gen. Hosp.

Corp. v. Esoterix Genetic Lab'ys, LLC, No. 18-11360, 2019 WL

4218706, at *1, *4 (D. Mass. Sept. 4, 2019). Esoterix's motion to

dismiss was denied, save for the count of the complaint that sought

reformation of the settlement agreement (count five). See id. at

*5-6. That count was dismissed as moot (due to the court's

disposition of the breach of contract claim). See id. Following

the parties' stipulation to dismiss without prejudice the

remaining claims — including those pending against LabCorp — the

court entered judgment for the Hospitals on the breach of contract

claim in an agreed-upon sum of $1,291,427.13 plus interest. The

judgment also granted the Hospitals' prayer for an audit and

accounting. These timely appeals ensued.

II. ANALYSIS

These appeals rise or fall on the Hospitals' claim that

Esoterix breached the License by failing to pay certain royalties

3The district court deemed the record insufficient to determine whether LabCorp was liable for the breach and granted partial summary judgment against Esoterix only. See Gen. Hosp. Corp., 2019 WL 4218706, at *1 n.1. That ruling is not challenged before us.

- 7 - and sublicensing fees. Our analysis of that claim begins — and

ends — with Esoterix's flagship contention: that the terms of the

release wiped out Esoterix's obligations to pay the unpaid

royalties and sublicensing fees for uses and sales that occurred

before the effective date of the release (June 27). Contrary to

the district court's determination, the terms of the release and

the License do not indicate that Esoterix's obligations arose after

the release's effective date (when they became due and payable).

We subdivide our analysis into three segments. First,

we review the text of the relevant release provision. Next, we

assess the district court's interpretation of that provision.

Finally, we address the effect of the release and explain how it

operates in this case.

For the most part, the applicable legal standards are

familiar. We review the district court's entry of summary judgment

de novo. See Mason v. Telefunken Semiconductors Am., LLC, 797

F.3d 33, 37 (1st Cir. 2015). In the course of that review, we

take the facts in the light most hospitable to the nonmovant (here,

Esoterix) and draw all reasonable inferences therefrom to that

party's behoof. See id.

This case, removed from a state court, is brought in

diversity jurisdiction. See 28 U.S.C. § 1332. Thus, although we

look to federal law for the summary judgment framework, we look to

state law for the substantive rules of decision. See Mason, 797

- 8 - F.3d at 38 (citing Hanna v. Plumer, 380 U.S. 460, 473 (1965)).

The parties agree — and the choice-of-law provisions in the

settlement and license agreements reflect — that Massachusetts is

the wellspring of the relevant state law.

A. The Settlement Agreement and Release.

In matters of contract, words are the signposts that the

contracting parties use to demarcate the boundaries of their

agreement. Consequently, we begin with the text of the release

provision contained within the settlement agreement.

Under Massachusetts law, the interpretation of a

contractual provision is a question of law for the court. See NTV

Mgmt., Inc. v. Lightship Glob. Ventures, LLC, 140 N.E.3d 436, 443

(Mass. 2020); see also Bank v. Thermo Elemental Inc., 888 N.E.2d

897, 907 (Mass. 2008). "Contract language is ambiguous where the

phraseology can support a reasonable difference of opinion as to

the meaning of the words employed and the obligations undertaken."

Bank, 888 N.E.2d at 907 (quotations omitted). "[T]he parties'

intent must be gathered from a fair construction of the contract

as a whole and not by special emphasis upon any one part." Bukuras

v. Mueller Grp., LLC, 592 F.3d 255, 262 (1st Cir. 2010) (quotations

omitted) (applying Massachusetts law). Words that are "plain and

free from ambiguity" must be understood in their "usual and

ordinary sense," and a contract should be interpreted "in a

reasonable and practical way, consistent with its language,

- 9 - background, and purpose." Id. (quotations omitted). "[A]bsent

ambiguous provisions, we look solely to the language of the

contract and do not consider extrinsic evidence." NTV Mgmt., 140

N.E.3d at 443.

The principal release provision — section 3.1 of the

settlement agreement — sweeps broadly. In it, the Hospitals agreed

to:

release, waive, forever discharge, and hold harmless [Esoterix] . . . of, from, and with respect to, any and all liabilities, losses, damages, charges, complaints, claims, counterclaims, obligations, promises, agreements, controversies, actions, causes of action, suits, rights, demands, costs, debts and expenses . . . of any nature whatsoever, known or unknown, suspected or unsuspected that may have arisen before the Effective Date . . . relating to or arising from . . . the [License], including but not limited to . . . the payment of any past royalties or other fees pursuant to the [License] . . . .

By these terms, the parties manifestly intended to enter into a

release with many attributes of a general release — a release that

broadly discharges liability for all claims and demands, whether

known or unknown. See Eck v. Godbout, 831 N.E.2d 296, 300-01

(Mass. 2005).

The release is meaningfully limited in only two ways.

First, the release is limited temporally: it applies to any matter

that "may have arisen" before its effective date. Second, the

subject of the release is limited: the matter released must

- 10 - "relat[e] to or aris[e] from" one of the release's enumerated

topics (a taxonomy that includes the License).

Read in light of the settlement agreement as a whole,

the release is unambiguous. The adjacent release provision —

section 3.2 — releases obligations related to the QIAGEN litigation

(the underlying incident that prompted the settlement agreement).

The existence of this second (tailored) release provision confirms

that a broader release was part and parcel of the parties'

bargained-for settlement. See, e.g., Cohen v. Steve's Franchise

Co., 927 F.2d 26, 29 (1st Cir. 1991) (explaining that, under

Massachusetts law, "[a] reading rendering contract language

meaningless is to be avoided"); Oliveira v. Com. Ins. Co., 112

N.E.3d 1206, 1210 (Mass. App. Ct. 2018). It is commonplace that

"a release may be prompted by the settlement of a specific dispute

or resolution of a specific issue," and yet the parties may choose

to negotiate a general release that "operates to settle all other,

unrelated matters." Eck, 831 N.E.2d at 300-01. The release has

two meaningful limitations, but it nonetheless operates to

extinguish many matters beyond those stemming from the QIAGEN

litigation.

B. The District Court's Order.

Notwithstanding the breadth of the language in which the

release is couched, the district court held that the Hospitals'

claim for royalty payments was beyond the purview of the release.

- 11 - See Gen. Hosp. Corp., 2019 WL 4218706, at *3-4. Refined to bare

essence, the court reasoned that the Hospital's breach of contract

claim accrued when Esoterix's unpaid royalties and fees became due

and payable. See id. at *3. Because this payment deadline

occurred after the effective date of the release, the district

court determined that the breach of contract claim was not

foreclosed. See id. Relatedly, the court rejected Esoterix's

contention that its obligations to the Hospitals arose before the

payment deadline. See id. at *3-4.

The district court's focus on when the Hospitals' cause

of action accrued is insupportable. Massachusetts law is pellucid

that a broad release can encompass all matters that come within

its terms. With respect to general releases covering "any and all

claims . . . whatsoever of every name and nature," claims can be

released even if they were not in the forefront of the parties'

thinking. Eck, 831 N.E.2d at 300-01; see Radovsky v. Wexler, 173

N.E. 409, 410 (Mass. 1930) ("A general release of all demands

embraces everything included within its terms."). This is so even

when a cause of action has yet to accrue. See Eck, 831 N.E.2d at

302; see also Sword & Shield Rest., Inc. v. Amoco Oil Co., 420

N.E.2d 32, 33 (Mass. App. Ct. 1981). For instance, a contingent

obligation can be released by a general release even before

preconditions occur that would ripen that obligation into an

enforceable promise. See Radovsky, 173 N.E. at 410; see also

- 12 - Pierce v. Parker, 45 Mass. (4 Met.) 80, 89-90 (1842). The guiding

principle is that the plain meaning of the unambiguous terms of

the release control. See, e.g., Leblanc v. Friedman, 781 N.E.2d

1283, 1290-91 (Mass. 2003); Schuster v. Baskin, 236 N.E.2d 205,

208 (Mass. 1968).

The district court's reasoning contravened this guiding

principle by ignoring the terms of the release in two ways. First,

the release applies to considerably more than causes of action,

liabilities, rights or demands. It also encompasses, among other

things, "any and all" "obligations," "promises," and "debts."

Second, the release applies to all claims that "may have arisen"

before its effective date. Thus, the actual accrual of a cause of

action lacks any talismanic significance.

What counts is the meaning of "arisen," which — depending

on the object of the verb — may or may not be synonymous with the

term "accrued." See Eck, 831 N.E.2d at 302 (holding that claims

arise "at the time of the underlying incident giving rise to the

claim," which may be before any cause of action accrues in fact

(quotations omitted)); see also John Doe No. 4 v. Levine, 928

N.E.2d 951, 953 (Mass. App. Ct. 2010) ("The two terms 'arise' and

'accrue' are not synonymous."); cf. United States v. Romain, 393

F.3d 63, 74 (1st Cir. 2004) (explaining that "words are like

chameleons; they frequently have different shades of meaning

depending upon the circumstances"). It follows that an isthmian

- 13 - focus on the timing of the breach of contract claim would be

inappropriate. "When the words the parties have selected possess

a breadth enveloping myriad meanings, the judge need not rush to

play the role of augur." Fashion House, Inc. v. K Mart Corp., 892

F.2d 1076, 1084 (1st Cir. 1989).

C. The Effect of the Release.

Setting to one side the district court's reasoning, we

consider afresh the extent to which the release covered Esoterix's

unpaid royalties and other payment obligations. The "ordinary

sense," Bukuras, 592 F.3d at 262, of the term "obligations," as

used in the release, is wide-ranging and easily accommodates a

duty to pay royalties and sublicensing fees. Nor do the Hospitals

dispute that Esoterix's unfulfilled obligations "relate" to the

License (a subject matter specified in the release). The analysis

of the release's effect, then, reduces to what extent — if at all

— Esoterix's obligations "may have arisen" before the effective

date of the release. When reading the term "arisen," in

conjunction with the object "obligation," the pivotal question

becomes whether Esoterix's royalty and sublicensing fee

obligations may have originated before June 27, 2017. To answer

this question, we turn to the meat of the parties' financial

arrangements.

The royalty and sublicensing fee provisions of the

License make plain that Esoterix's obligations arise upon its sales

- 14 - of processes and products, on the one hand, and its receipt of

sublicensing income, on the other hand. The License provides, in

relevant part, that Esoterix "shall pay" a royalty for sales of

processes or products. License § 4.5(a)-(b). The obligatory

language — "shall pay" — is modified. A royalty is paid

"[b]eginning with the first COMMERCIAL SALE," id. — defined as

having been "completed at the time [Esoterix] records a sale," id.

§ 1.6 — and "continuing during the term of the [License]," id.

§ 4.5(a)-(b). Thus, a royalty obligation arises when the sale is

first recorded. That Esoterix must pay a royalty "continuing"

during the agreement's term confirms that royalties are

continually owed upon sales until the license runs its course.

For sublicensing fees and other income, Esoterix "shall

pay" the Hospitals a percentage of "any and all fees" and of "any

royalty or similar payments." Id. § 4.6(a)-(b). The terms "fees"

and "royalty or similar payments" are each modified by past

participles — "actually received" and "paid," respectively. Id.

Past participles can be "used as adjectives to describe the present

state of a thing," Henson v. Santander Consumer USA Inc., 137 S.

Ct. 1718, 1722 (2017), and also can "indicate[] past or completed

action," Fla. Dep't of Revenue v. Piccadilly Cafeterias, Inc., 554

U.S. 33, 39 (2008). Read in context, the past participles of "to

receive" and "to pay" suggest that those actions must have occurred

for Esoterix's payments to be required. In other words, Esoterix

- 15 - owes a portion of sublicensing money when that money has been

received by Esoterix or paid to it. The upshot is that Esoterix's

obligations to pay sublicensing fees and other income originate as

Esoterix receives the fruits of its sublicensing rights.

The structure of Esoterix's royalty and other payments

lends further support to this interpretation. Apart from certain

annual fees, see License § 4.3, Esoterix's other monetary

obligations are structured to be proportional to sales (though the

method of accounting when a sale occurs varies). The royalties

owed on products, for example, are just a percentage of "NET

SALES," see id. § 4.5(b), which are defined as occurring when

Esoterix receives the amount payable, see id. § 1.22(c). Royalties

owed on processes are amounts that are keyed both to sales and to

utilization. See id. § 4.5(a).4 That the amounts owed are tied

to actual sales reinforces an inference that Esoterix's

obligations arise from exercising its licensing rights. And this

inference is buttressed by the logic that undergirds patent license

royalties in general. Such royalties, in effect, allow licensees

to engage in conduct that otherwise might constitute patent

infringement. See Spindelfabrik Suessen-Schurr, Stahlecker &

4 Viewed from 50,000 feet, the amount is calculated by multiplying a royalty rate based on the utilization of the processes from the prior reporting period — defined in the License as the "AVERAGE REIMBURSEMENT" — against a base that also tracks sales through the "number of PROCESSES invoiced to THIRD PARTIES during the current REPORTING PERIOD." See License §§ 1.34, 4.5(a).

- 16 - Grill GmbH v. Schubert & Salzer Maschinenfabrik

Aktiengesellschaft, 829 F.2d 1075, 1081 (Fed. Cir. 1987) ("[A]

patent license agreement is in essence nothing more than a promise

by the licensor not to sue the licensee."); see also 3 Roger M.

Milgrim, Milgrim on Trade Secrets § 10.02 (2021) (differentiating

between patent and trade secret licenses). "In this sense, [a]

patent license royalty is much like the payment of tolls on a

bridge or turnpike." Milgrim, supra, § 10.02. A duty to pay would

logically originate when and as the responsible party engages in

the licensed conduct.

The Hospitals demur. In their view, Esoterix's

unfulfilled royalty and other fee obligations — for uses and sales

that occurred before June 27 — arose when the payments became due

and payable. Stripped of rhetorical flourishes, the Hospitals

seek to uphold the judgment on their breach of contract claim by

focusing on when the Hospitals' right to demand payment came into

existence and when the breach of contract claim accrued. Were

this focus correct, the net result would be that the release did

not extinguish Esoterix's obligation to pay the unpaid amounts

because they became due only after the release's effective date.

But the Hospitals' focus is incorrect. Their thesis, at

bottom, rests on an assumption that there is a condition precedent

requiring that the amounts owed are due and payable before the

obligations can arise. See Mass. Mun. Wholesale Elec. Co. v. Town

- 17 - of Danvers, 577 N.E.2d 283, 288 (Mass. 1991) (defining condition

precedent under Massachusetts law as an event that must occur

"before an obligation to perform arises under the contract"). Even

so, the Hospitals have not mustered any plausible support for their

thesis from within the four corners of the License. The absence

of such support is telling. "Emphatic words are generally

considered necessary to create a condition precedent that will

limit or forfeit rights under an agreement." Id. (quotations

omitted); see Restatement (Second) of Contracts § 226 cmt. a (Am.

L. Inst. 1981) (explaining that words that create a condition

precedent are "on condition that," "provided that," and "if"). A

searching examination of the License leaves no doubt but that it

is devoid of any terms that suggest that the obligations must be

due or payable before they are deemed to originate. Rather, the

royalty provisions' due and payable clauses are run-of-the-mine.

See License §§ 4.5(e), 4.6(d) (stating that payments required by

sections 4.5 and 4.6 "shall be due and payable" "within forty-five

(45) days after the end of the REPORTING PERIOD" and that, for

section 4.5, the first royalty payment would not be due for some

specified time).

Nor is the "intent of the parties to create [a condition

precedent] clearly manifested in the contract as a whole." Mass.

Mun., 577 N.E.2d at 288. For example, no provisions indicate that

the obligations arise upon demand or assessment. In point of fact,

- 18 - the termination provision shows just the opposite. It states that

"all royalties and other payments . . . accrued or due to [the

Hospitals] as of the termination date shall become immediately

payable." License § 10.7. This language clearly evinces the

parties' understanding that royalty and sublicense fee obligations

have significance independent of any contractual obligation to

make timely payments. If a party terminated the License during a

reporting period, Esoterix would still owe the monetary

obligations that arose during that period even though those

obligations were not yet payable.

Without any plausible support in the License, the

Hospitals' asseverations defy common sense. A payment deadline

may be informative as to when a breach for failure to pay occurs.

Standing alone, though, it does not shed light on when a royalty

obligation is incurred. After all, the postponement of a debt

payment does not mean that the debt has not already been created;

it means only that the payment is not yet required. For example,

a bank may lend a homeowner $300,000, yet postpone payment

obligations incrementally in line with a twenty-year repayment

amortization schedule. That only a fraction of the principal is

due each month does not mean, at any point in time, that the

homeowner is absolved of her overall obligation to repay the entire

loan balance.

- 19 - The Hospitals' contention that Esoterix's payment

obligations cannot arise until they are calculable is no more

logical. Here, moreover, it is apparent that the royalties and

sublicensing fees may be calculated at any time (even before the

end of a reporting period when they become due). The royalty

payments for processes are based on an equation in which all but

one of the variables are known from the prior period. The single

unknown variable is the number of processes invoiced to third

parties during the current reporting period, which can be assessed

at any time. See id. § 4.5(a). The royalties for products and

payments related to sublicensing are just a percentage of payments

and income received. See id. §§ 4.5(b), 4.6(a)-(b). These, too,

are calculations that can be performed before the end of a

reporting period.

The Hospitals identify two other potential cures for the

infirmities that plague their position. On close scrutiny, though,

neither potential cure proves to be a panacea.

To begin, the Hospitals say that even if the relevant

payments are calculable on an incremental basis, they had "no way

of knowing if any royalty would be due." This may be true, but it

does not move the needle in the Hospitals' direction. The critical

fact is that the release applies to obligations "known or unknown."

The Hospitals' second therapeutic fares no better. They

implore us to consider the circumstances surrounding the

- 20 - settlement. The settlement discussions, the Hospitals insist,

show that the parties never intended the result that Esoterix now

seeks. Building on a provision in the release that deals with

"the payment of any past royalties," they argue that the release

applies only to the "past royalties" at stake in the QIAGEN

litigation. This argument, though, encounters strong headwinds

under Massachusetts law.

Examination of extrinsic evidence is improper where, as

here, the terms of a contract are neither vague nor ambiguous.

See NTV Mgmt., 140 N.E.3d at 443. This rule applies with full

force to releases. See Radovsky, 173 N.E. at 410 ("A release which

is absolute and unequivocal in its terms cannot be explained by

parol evidence.").

To be sure, this general rule is susceptible to an

exception under which extrinsic evidence can be used to "determine

whether an apparently clear term is actually uncertain." Smart v.

Gillette Co. Long-Term Disability Plan, 70 F.3d 173, 179 (1st Cir.

1995). This exception, though, has no bearing here. The reference

in the release to "past royalties" — the proffered textual hook on

which the asserted relevance of the settlement discussions is hung

— appears in a clause that does nothing to limit the broad scope

of the release. It follows the phrase, "including but not limited

to," and extrinsic evidence cannot write that phrase out of the

release. See id. at 180 (explaining that extrinsic evidence cannot

- 21 - "be employed to contradict explicit contract language or to drain

an agreement's text of all content save ink and paper"). The

release plainly applies to any and all of Esoterix's royalty

obligations under the License, which arose prior to the release's

effective date. And that holds true whether or not those royalties

relate to the QIAGEN litigation.

The breadth of the release was by choice of the

contracting parties. Courts should not attempt to "accomplish by

judicial fiat what [a party] neglected to achieve contractually."

FDIC v. Singh, 977 F.2d 18, 23 (1st Cir. 1992) (alteration in

original) (quotations omitted). That admonition has special force

where, as here, the parties are sophisticated entities that

negotiated a release with the benefit of counsel. In signing the

settlement agreement, the parties acknowledged that they had been

"specifically advised" of the "consequences . . . and their

respective rights and obligations." We are not at liberty to

rewrite this bargained-for arrangement.

To sum up, the terms of the License show that Esoterix's

royalty and sublicensing fee obligations arise upon its sales of

processes and products and its receipt of sublicensing income,

respectively. As such, the unpaid obligations arose prior to the

effective date of the release and, thus, were extinguished by it.

In the absence of a duty to pay those amounts, there could be no

breach of the License, and judgment should not have entered in

- 22 - favor of the Hospitals on their breach of contract claim. Instead,

the district court should have granted Esoterix's motion to dismiss

that claim.

D. Tying Up Loose Ends.

In addition to having ruled in favor of the Hospitals on

their breach of contract claim, the district court made certain

other rulings. Two of these other rulings require our attention.

The district court denied the defendants' motion to

dismiss the Hospitals' claim of entitlement to a full audit and

accounting of the relevant records for the reporting period ending

June 30, 2017. See Gen. Hosp. Corp., 2019 WL 4218706, at *5. The

court determined that it would award injunctive relief on that

claim, see id. at *6, and entered judgment thereon in favor of the

Hospitals. This grant of relief draws its essence from section

5.4 of the License, which gives the Hospitals audit rights "solely

for examination during normal business hours to verify any reports

and payments made under, and/or to determine compliance in other

respects with, [the License]." License § 5.4. Without Esoterix's

duty to pay the unpaid amounts, the Hospitals' right to an audit

and accounting to "verify" or "determine compliance" as to those

payments would cease to exist. Given our holding that the

Hospitals have released Esoterix with respect to all obligations

incurred up to June 27, 2017, the Hospitals are entitled to payment

for only four days of the reporting period that they wish to audit.

- 23 - This curtailment in the period that is open to audit may

very well influence both the Hospitals' desire for the audit and

the district court's determination that one is required

(especially in view of the License-fee setoff). We think it

sensible, therefore, to vacate the judgment as to the audit-and-

accounting claim; without prejudice, however, to the Hospitals'

right to renew their request if they wish to do so under the

materially changed circumstances.

The defendants also moved to dismiss count five — the

Hospitals' claim for reformation of contract (the settlement

agreement) — based on mistake. See Gen. Hosp. Corp., 2019 WL

4218706, at *5. The district court granted the motion as to the

claim, dismissing it as moot. See id. Given the collapse of the

Hospitals' breach of contract claim, see supra Part II(C), the

reformation claim is no longer moot. Since the district court did

not decide the motion to dismiss count five on the merits, we

vacate the order of dismissal so as to allow the district court to

consider this repositioned claim in the first instance. See

Hochendoner v. Genzyme Corp., 823 F.3d 724, 735 (1st Cir. 2016).

III. CONCLUSION

We need go no further. For the reasons elucidated above,

we vacate the judgment in favor of the Hospitals as to the breach

of contract claim and direct the district court to enter judgment

granting Esoterix's motion to dismiss that claim. We vacate the

- 24 - judgment as to the audit-and-accounting and reformation claims,

without prejudice. We leave the judgment undisturbed as to all

claims not specifically mentioned and remand the matter to the

district court for further proceedings consistent with this

opinion. Costs shall be taxed in favor of the defendants.

So Ordered.

- 25 -