-: SJC-12688, Lynn Labkey v. Stored Healthcare System LLC.
-: Mr. Ward, good morning?
-: Good morning Your Honor.
Mr. Chief Justice and may it please the Court
the principal issue in this case is whether
the measure of damages and a breach
of contract action can include the replacement cost
of property the plaintiff never expected to own,
but only ever expected to use.
Steward agrees--
-: Implications of the bankruptcy decision about GRI on
the assets of CCSB.
-: So, to the extent that there was any dispute between
the parties Your Honor and we understand the plaintiff
to have waived any claim to the assets.
That bankruptcy decision would have resolved it in
an issue preclusive manner because what
the bankruptcy court held, was that the grant funding
in the equipment that made up the CCSB belonged
to a third party belonged to GRI.
And the bankruptcy court specifically enjoined plaintiff
from seeking in this litigation any damages
that really belonged to GRI.
So in this case Steward agrees
and we agree on appeal and we agreed below.
That to the extent plaintiff actually proved
her own financial losses.
If she actually had put in evidence
of her last future earnings potential, she would be able
to recover that because that's personal to her.
However what she what she cannot do
is the only thing she did, which is try to put in evidence
of harm to GRI of what it would cost to replace the CCSB,
which was an asset of this other company, according
to the bankruptcy court and again according
to her own concessions in this case.
By seeking damages in that amount
and by the Superior Court awarding damages
in an amount equal to the labs replacement cost.
The court ran afoul of decades of this Court's precedents
which state that you don't put plaintiff
in a better place financially
than if defendant had never breached
and importantly in this case.
Even though the law generally is that in breach
of contract actions, you don't get any kind
of emotional distress damages.
Plaintiff in this case expressly waived any right
to emotional distress damages or mental distress damages.
And also waived any rights reputational harm.
-: I think the plaintiff for trying to say as far
as expectation that she'd be able to walk into a turnkey lab
and continue her cancer research
and that that's expectancy damages.
-: And the financial component of that expectancy Your Honor
is only her own salary, which is $425,000 a year or so
for some number of additional years.
And plaintiff herself identify this
in her testimony at trial.
If you look for example, at record appendix three pages 26
to 27, plaintiff explain that the reason
why she got paid $425,000 a year was that she was able
to bring this turnkey lab, to other facilities
and with all the grant money that flows from it.
That's why she makes more than the other research--
-: As she was able to bring the turnkey lab.
-: Correct and so again, if you took, for example
the six years that her counsel argued to the jury she might
have continued working after the contract
with Steward expired, multiply that times 425, you get
a number that once you reduce it to a net present value
is probably less than $2 million.
It's not $10 million.
Effectively what this appear, if you think about
this functionally, if her expected future income from using
the lab was likely something less than $2 million
and she's getting $10 million from the Superior Court.
Then that additional interest, whatever it is,
is being valued at $8 million.
-: What about the value of her research?
-: The research may have had some value
to the federal government.
They may have been willing to pay.
-: May have?
-: Well I'm sure it did although it's--
-: They have may have the problem isn't it may have.
-: Well may have a probable at the end
of the day nobody wanted those samples right, so--
-: C'mon that's ridiculous. -: Well, is that fair say?
Ward: I think it is fair to say because
the bankruptcy estate, offered them
for free to whoever would take them
and no other research institution wanted them.
But put that aside the important point for--
-: Its a the big putting aside, though isn't it?
-: The important point for her damages Your Honor,
is that her financial interest
and she waived any other non financial interest,
is less than $3 million.
-: So tell me, what was the jury thinking then?
Why do you think they went this route?
-: Well the plaintiffs put in at trial evidence from
the plaintiff that the cost to replace the lab
would be $10 million.
They then put in evidence of what it would cost to operate
the lab and the amount of grant funding
that was in place both in 2012 and in 2014.
The problem and Steward has been arguing this
from the beginning, is that those large numbers
the 10 million replacement cost for the lab all
the grant funds did not belong to the plaintiff personally.
And in a breach of contract case.
This Court has said again and again plaintiff is entitled
to be put back in the position she would have been
if there had been no breach--
-: But there was categories of damages were not broken out.
You didn't object to the jury instructions.
-: We didn't object to the jury instructions because there
was no need to.
The jury instructions specifically said,
that plaintiff only could recover for her own personal harm
and not for harm to third parties.
That's a Joint Appendix, our record appendix three
269 to 70.
The jury instructions also instructed the jury the plaintiff
could not recover for her emotional distress injury.
And before we even got to the point of jury instructions,
this is at record appendix two page 179.
The plaintiff waived any right to reputational harm.
So all that was left was her financial harm.
-: So why do you think the jury misunderstood that?
-: I can't explain Your Honor.
But the reason why we have things like Rule 59(e)
and remittitur is precisely for situations like this one
in which the jury here's some evidence and goes astray
and awards categories of damages
which you could not properly award.
-: Can you go back and-- -: The problem I have
Gants: with your argument is that you
and your law firm are not the attorneys trial.
I've read the closing, I read the jury instructions.
The closing argument was simply that there was no causation.
They didn't make any of the arguments
that you're making before us today to the jury.
-: They may not have made them to the jury
but they certainly made them to the trial court.
And if you look at the motion in limine
if you look at the directed verdict motion
and ha-ge-n-o-v brief, in every single location
what trial counsel argued
was that plan should be limited
to her own personal financial losses.
And that the cost of replacing the lab
and of the grant funds did not fall into those categories.
-: So what do we do with the fact that...
I've read the motion in limine and I've read her rulings
and I'm at closing argument your predecessor
is arguing purely that there was no causation here
and seems to imply that the issue
is the destruction of the lab.
-: And for purposes of preserving our arguments Your Honor.
I don't believe we were required to make effectively
a legal argument to the jury.
-: This is not, the argument you're making is not
a legal arguments, it's legal argument but also a...
We have to why the jury went astray.
The jury went astray because you never said
to them, nobody ever said to them you can't give her money
that you're required to give her the money
that she otherwise would have earned herself.
-: Your Honor the jury instructions told the jury that--
-: The jury instructions did not.
The jury instructions basically said that the damages
are gonna be the amount foreseeable to Steward
at the time of a contract.
-: Your Honor, what the jury instructions told
the jury again, this is 269 to 70
in the record appendix three.
Is that they were limited to providing her damages
for injuries quote that she suffered
and not for injuries incurred by any other person or entity.
-: Okay, I understand that so what, but they also said
that their damages that are foreseeable
from by Steward at the time they entered into the contract.
-: And damages foreseeable to Steward
at the time they entered a contract
and an action by Dr. Halackey would be limited to
for example, some additional years of her salary after
the contract had expired, because she
could no longer use the lab.
It would not include the cost of giving her a laboratory
that she never expected to own in the first place.
-: Argument never made to the jury.
-: And again Your Honor, it comes in through
the jury instructions which specifically say.
Only give her damages for harm she suffered personally
and not harm suffered by some third party.
-: Okay, so what what if we were to say.
And I'll ask your brother in a moment what he would say.
What if we were to say well, the $200,000
it's appropriate to go to her.
I think you can see that point.
-: We do.
-: $10 million, she can't go and spend it
on buying a house in Weston.
That money would have to be remanding into the trial judge
to hold the money in trust for the purpose of recreating
the lab that she lost.
-: And that that sounds to me, Your Honor almost, well
there are two issues with that.
One of them well sounds like an award
of specific performance and she never saw
a specific performance she you only ever brought an action
for her own personal damages.
The second problem is that it
was never incumbent upon Steward to fund the lab
in the first place beyond the $300,000 described
in the contract--
-: Probably not to destroy the lab, wasn't it?
-: It was to support the lab, Your Honor.
-: With the support not to destroy it the way
it was destroyed.
-: Because the lab is destroyed.
Look we're not we're not contesting liability on appeal.
All we're contesting is the proper measure
of her personal damages which is what she was limited
by the jury instructions to obtaining.
Her personal damages were something less
than $3 million, because that's all she would
have earned at Steward had fully performed--
-: Why isn't the value of her research, valuable to her
as opposed to just the government.
-: To the extent is valuable to her Your Honor.
There's the financial value of it.
Which again, is the $425,000 salary she earns
by being able to--
-: But there's more to it than that.
It's her life's work, right.
-: There's more to it than that, but that sounds
in the nature of emotional or mental distress
or reputational harm and she waived all of those things.
That argument also proves too much.
I assume judges and in big firm lawyers also valued
their professions and the the businesses
they built up over time.
However the law is absolutely clear, you can go
to this Court's decision in John Hancock.
You don't award emotional distress damages
in breach of contract cases, even if the impact
of the breach of contract--
-: But isn't this a little different.
I'm not talking about her reputation or her profession.
I'm talking about her life's work, what she created.
-: And of some breach of contract cause
the practice I built up to be destroyed I might
be distressed by that.
But the answer is not some kind of additional award
and a breach of contract action.
There are tort causes of action, you might have 93(a).
If she hadn't waived emotional distress maybe we
could be talking about that.
But you don't take a contract in which
the financial expectancy was two and a half million dollars
and turn it into $10 million, much less $22 million.
By positing some additional value to the plaintiff beyond
the actual financial expectation--
-: But you dispute what it would cost to rebuild a lab.
Did you dispute that?
-: We dispute that evidence was put into the record
to support it.
Plaintiff put in $10 million.
The superior court initially as the court knows excluded
that on the basis that it was too speculative
and was unsupported by any kind of expert testimony.
The superior court ultimately led it in on the basis
that the door had been opened.
But even when you have that one sentence of testimony
in the record, we would say that's not enough.
The plaintiff actually has to prove based upon
that the preponderance of the evidence to
a reasonable certainty, what the damages would have been.
The superior court tried in a sense back-filling support
for the 10 million by walking through equipment costs
and what operating costs were, but there was no witness
a trial not even Dr. Halackey, certainly not an expert.
Who actually said that the way
the Superior Court went about explaining
the $10 million, made any sense and was reasonable
as a matter of valuing lab creation costs.
-: Yeah, but on that issue, you take the position
that the value of lab can be determined
by Dr. Halackey's testimony because
it's really, expert testimony but
in the guise of lay testimony.
But, isn't another reason that that evidence could come in
because the door was opened rather than the limitation
on expert testimony through lay witnesses.
-: Even if it came in our position is that
that one single sentence without any explanation for it
is insufficient to support a $10 million for it.
You can't, if this actually had been an expert
and the expert had provided the ultimate conclusion
and nothing else.
That would be an insufficient basis
and there should be no less of a standard for lay witnesses
who are in effect testifying as experts.
-: But generally when somebody makes an assertion
of that consequence, there's cross examination attempting
to attack its foundation.
And there was none here.
-: There was not cross examination but again, ultimately
the burden is on the plaintiff to prove up the damages case.
And what we would say is that if she had shown up
and just offered that one sentence and sat back down
and we hadn't cross examined her
that would be an insufficient basis to support
a damages award plaintiff would not have carried her burden
of explaining why the $10 million is
a reasonably certain figure to the jury.
-: And then in closing argument, there's no argument
that jury never hears that that's an insufficient basis
for the $10 million.
That's not argued as part of
the closing argument by Steward.
-: I do not believe that we were required to make--
-: I understand that, but you're basically saying to us.
We're asking us to undo a jury verdict
or a judge's mediator with regard to a jury's verdict
for arguments never made to a jury.
-: Not not made to the jury, but there are legal arguments
which were made repeatedly to the trial court judge.
And I will note that the plaintiff made some kind
of waiver argument below the trial court rejected it.
This appears at I believe it's page 324 to 25
in record appendix one.
So that the trial court understood that the key legal issue
in this case, which is whether plaintiff can recover
an award based upon amounts that belong to a third party
was front and center throughout this case--
-: Which third party. Who was the third party here.
-: The third party is GRI who the bankruptcy court held
was the actual--
-: GRI was the creation of Steward.
-: GRI was the creation of Steward Your Honor.
And GRI was the spin off of Steward Research
and Specialty Projects Corporation the bankruptcy court held
in a decision which is no longer subject to appeal.
That it owned the CCSB his assets
and that of plaintiff wanted them she had
to go ask GRI for.
-: I understand that you're arguing she's not entitled
to a windfall and that this presents a windfall
but, going into this contract and coming out
of this contract, she's in
a substantially lesser position than she was going in
because of the loss of her research and equipment.
-: And again Your Honor why we agree that if she were asking
for, her future lost earnings potential.
Her own personal damages, she would be able to obtain that.
Because she no longer has this lab, which she testified
is the reason why she can make $425,000 a year.
You do not however value, the emotional reputational
whatever these other nebulous interests are
at the replacement cost of the lab
because that's effectively treating her
as if she's the owner.
It simply makes no sense to say that someone
with two and a half million dollars in financial losses
can get seven and a half million or 20 or $20 million
in additional damages on top of that.
Because of some nebulous interest,
which this court repeatedly has say you don't get
in breach of contract cases.
And she waived.
-: Prior to the creation of GRI by Steward,
who owned the assets?
-: It would have been Steward Research
and Specialty Projects Corporation.
-: They owned the assets?
-: Right, because under federal law we walk through this
in our reply brief.
Title to assets is held by the sponsoring institution
which in this case would be a non-profit.
So it's either SRSPC or GRI.
They grant finance--
-: If she wanted to move, Steward did not own
the ma-ni-fe-sion that they couldn't, they could refuse
to transfer them.
-: The way it would work is, we would argue it out
in front of the federal grant funding agency.
But what's absolutely clear is
the plaintiff herself did not own them.
She could not, take it--
-: But this arguing, wherever she want they would go, right.
-: She argues that but the testimony was unambiguous
in the record and we walk through this in our reply brief.
If there's a dispute between the then current institution
and the principal investigator
then the federal government decides who at the end
of the day gets to take it.
She did not have an absolute right to bring in all
that she wanted--
-: Why did Steward would seem?
-: I'm sorry, what's that Your Honor?
-: No would Steward have an absolute right to retain it?
It's a funny kind of ownership done.
-: Yeah you're basically holding it in trust.
-: Yes that's right--
-: But the question still remains
what's her financial benefit from
that beneficial interest she hasn't it?
And her financial interest is 425 times some number
of additional years.
It's not 10 million it's not 22 million.
I know my time is expired I would like to address
their cross appeal briefly if I may, Your Honor.
-: Before you do that.
What if we agreed with the majority
in the Pennsylvania case is it fa-rr-a?
-: FIRREA.
-: FIRREA yeah, if we agreed with majority in FIRREA.
Would that mean you lose who can be distinguished
from this situation?
-: Even if you, FIRREA is a complicated case
because they are the plaintiff actually.
Being a tenured professor kept getting paid throughout
the time of the investigation.
And so my own sense is that the court felt he
should get something and so gave him the cost
of the lab over the vehement dissent of two of the justices.
So we think that's wrongly decided for several reasons.
If you decide nonetheless
that researchers university professors
who are wrongfully suspended maybe whose research
is disbanded, can get more than just
their last financial interest can get 10s of millions
of dollars for other reasons.
Then we would screw it still be stuck with the the problem
that the $10 million figure in this case is not supported
by competent evidence and is essentially unexplained.
I will know they did try plaintiff to try
to provide additional explanation for the $10 million.
The superior court kept that out.
So it's not as if the expectation was,
it was entirely up to us to to cross examine
and figure out the basis for the 10 million.
We also know what the basis for the 10 million is
from the supplemental interrogatory responses
which are part of the record on appeal.
Because they were part of our motion in limine
and the explanation Dr. Halackey gave for the $10 million
in their supplemental interrogatory responses.
There's no resemblance whatsoever to what
the superior court judge ultimately concluded
was evidence backstopping, 10 million.
So there's there's no witness who ever did say
why $10 million made sense.
And there's certainly no evidence and there was no witness
who was prepared to either.
-: Before you move on one more question.
Their contracts, basically said the federal regulation
the real property equipment, intangible property
and debt instruments that are acquired or improved
with federal funds shall be held by recipient
and trip by the interest by the recipient as trustee
that's what you're referring to, right?
-: Correct Your Honor.
-: So is that her being the recipient
are you saying Steward is the recipient.
-: No Steward is the recipient.
So under under federal regulations recipient
is defined as an institution.
And so, Steward Research Specialty Projects later GRI
is as a matter of federal law of the recipient.
The recipient holds it and trust and the recipient
is expressly charged by the same federal regulations, only
to allow the assets in grant funds--
-: Separate cause of action under that,
that could have been brought?
-: Well, at the end of the day Steward
and GRI reached a settlement.
So Steward continued.
Again, we're not contesting liability for the appeal.
But Steward did provide continue providing substantial
support to GRI even after the spin-off.
Steward put a claim in bankruptcy
for close to $10 million against GRI
because GRI had never paid Steward back for the support
that Steward was providing
and that those claims are ultimately settled.
So in a fact what she's saying is, rebuild me
this laboratory give me these grant funds
that I could see belong to a third party.
That entered a settlement with Steward
and waive any claims that itself may
have against Steward.
-: It's not me, as as Chief Justice Gants
was saying before it would be in trust
for the lab itself.
-: In award of--
-: She could spend it on a house in Weston as he says.
-: An award of damages, Your Honor, to her personally
could be spent on whatever she wants.
She has never asked for the relief
that Chief Justice Gants suggested.
And I'm not sure at this point that the court--
-: Also legal argument can be made
at anytime according to you.
-: Well, no Your Honor that's not true.
Again, I could walk through I have an entire page
which I can hand up to the court of
where we preserved our various arguments.
But throughout the case starting with the motion
in limine through the directed verdict motion,
through the GNOV.
At every time there was an opportunity to argue, we argued
that she was limited to her own personal recovery.
We should not include amounts that were owned
by the CCSB Which was part of, of GRI.
-: I'll give you three minutes more to argue
with regard to the cross appeal.
-: Thank you, Your Honor.
With respect to the cross appeal, obviously
that's an abuse of discretion standard.
And what this Court has said is that
a remittitur is so seldom overturned as
to almost never occur.
In this case, it could not have been
in the abuse of discretion.
For the Superior Court to set plaintiffs damages
at $10 million on a remittitur, when $10 million
is the value plaintiff herself
and her counsel, repeatedly identified as
the cost of reestablishing the laboratory.
We cited two instances of this and our reply brief.
Both plaintiff's own testimony that would cost $10 million
to quote, get a functional lab together.
Get people together and redo the projects.
We cited ha-ge-n-o-v brief
in which council identified $10 million as the amount.
But there were several other examples too.
So for example, plaintiffs counsels closing arguments
of the jury.
He said, quote, the CEO of this company told you
it's going to take $10 million to put
this lab back together.
Plaintiff's counsel at the jury instruction hearing
this is page 203 and record appendix two.
Halackey testified it was 10 million or so for the lab.
I could go on and on there's a few more examples.
Ultimately, in her briefing on appeal, she never argues
that $10 million is too low for replacing the lab.
What she basically argues is that $10 million
to replace the lab, plus some additional years
of operating revenue on top of that
but there are several big problems with that.
First, she explicitly disclaimed during her trial testimony.
Any right to grant funding and any right to
the operating funds and she expressly said
that the only grants and operating funds that
whatever belonged to her personally, were her own salary.
That's record appendix three, page 191 and 199.
We also have our basic windfall point, which is that
if Steward had performed these operating funds never
would have flowed to her personally.
Instead, the evidence at trial was that the lab
had about 3 employees and had many vendors
and equipment suppliers.
In fact, it also entered into contracts
with other laboratories that farmed off some of the research
to other entities.
What she's effectively asking this court to do
is to give her $10 million for the lab, plus in effect
the gross revenue for the CCSB.
But if this were any other type of business
and plaintiff for self described it as a business
of which she was the CEO, he
would never award gross revenue to the owner of
the business, she would award them their profit.
Law couldn't be clearer that you subtract out expenses
that were saved as a result of the defendants breach.
And so here in effect, plaintiffs profit
from this laboratory was her own salary.
So you don't you would never get from $10 million
to $22 million based upon
the gross grant revenues gross operating expenses
of the laboratory.
Plaintiff also sometimes points to grants
that were still awarded but had not yet been used
as of December 2012.
They put the dollar figure of $24 million on that.
There's a big problem with that too.
The evidence was undisputed at trial that by 2014,
that had almost all been used up
and there was not $24 million left in grant revenue.
-: Okay, can I ask another question chief?
Gants: Sure.
-: I think that the problem we're having is that
it seems to me like you admit my ability
but then you say that there is no remedy for that.
Really no remedy for that other than, you destroy her lab.
The value of recreating it is at least $10 million.
But somehow that's not your responsibility.
So there's a cause of action without any any remedy to it.
And it's not something that law usually allows.
-: That's not that's not correct, Your Honor.
-: Tell me why.
-: There was several remedies that we admit
could have been awarded here.
First, we admit that she, if she'd actually put in evidence
of her own future lost earnings potential.
An amount that and our motion
in limine briefing we said might be 2 million.
Maybe it's between two and three.
She could have recovered that.
That would put her back in the position she
would have been financially if Steward had performed--
-: I think you said if she had but she didn't.
-: She didn't and she admitted she didn't
in her post trial briefing.
-: Isn't there a fallacy in saying she's put back
in the position she would have been in
if she can never be put back in
that position since her research samples were destroyed.
-: And breach of contract law, Your Honor, awards
financial expectation and trust.
It does not award for all these other values like
the mental enjoyment or reputation particularly where
in a case like this one plaintiff waived those.
And it's undisputed that plaintiff admits twice
in her opening brief in this case that she waived any claim
for emotional or mental distress.
And before trial this
is page record appendix two 179 plaintiff waived any rights
to reputational harm.
So all of these other values are just out of
this case we're left with financial injury.
And again even if they were in the case should have
to get past this Court's decision in John Hancock.
You'd have to get past the fact that
it's simply proves too much
and again, every hopefully most people find fulfillment
in their job.
Most people think they're building something
and getting more out both giving more and getting more
than their own personal salary.
But there is not a single example of the court
as a result of that giving an employee even
a highly placed employee, even an employee
who drives business, something more
than their own lost financial interest.
Which is what they're asking here.
And it's not, we talk about
the dollar figures $7 million under
the Superior Courts award 20 million under the juries award.
Those are amounts that sometimes you don't see
in wrongful death cases.
And I hate to draw the analogy,
but this is not a wrongful death case.
This is a case of--
-: Cancer Research though.
-: She was a cancer researcher, but the fact that the court
should not come up with a special rule
that gives cancer researchers
or employees of nonprofits generally more
than they would get if they worked for a profit corporation.
There's no precedent for that.
And it would open set an extremely dangerous precedent
it would destroy the certainty which is the hallmark
of breach of contract law.
If plaintiff wants more than financial expectation
and trusts, that's why we have tort law.
That's why we have 93(a).
We do not have breach of contract law
to set sort of boundless damages awards
for non-financial interest--
-: So was a mistake just bringing us as a contract action
as opposed to a tort action.
-: It very well may have been a mistake on their part
but right now we have a breach of contract action
in which plaintiff waived reputational
emotional mental distress harms.
Waived any claim for harm to third parties
and admits that she did not own all of these assets.
Hence, her only financial interest
was her own last future earnings potential,
which plaintiff as a tactical decision decided not to put
in front of the jury.
Because plaintiff did not want mirror
low-single-digit millions.
Plaintiff swung for the fences asked me for 20 to 30
or more million millions of dollars and the fact that
that is a legally invalid theory of damages.
And as a result, she may be down to 200,000.
And we think actually would be fair for the court
to remand at the Superior Court to address our point
that, she didn't put in evidence
of personal financial losses in the first instance.
But the fact that she swung for the fences
on a legally valid theory should not drive this court
to set a dangerous precedent.
-: Before you leave one fast question, you've made reference
to a supplemental interrogatories of Dr. Halackey.
I assume that those were done before trial.
-: Those were done in the midst of, I believe
in the midst of trial.
Because there was the bifurcation the...
No it was before a trial.
It then came in, in our motion in limine.
So when we're arguing about
what maybe we meant by 2 million or the fact
that we preserved things.
Those are part of the appellate record before the court--
-: I guess more precisely when there was cross examination
of Dr. Halackey after she gave the $10 million figure.
Did you have access to
those supplemental interrogatory answers?
-: We did, Your Honor.
-: Okay, thank you.
-: Thank you, Your Honors.
-: Mr. Beerwith.
-: Mr. Chief Justice and may it please the Court.
I wanna start with the bankruptcy decision
because that came up a couple of times
and I just wanna clarify things there.
So the bankruptcy court did not decide
the issue of ownership.
There's this procedure in the bankruptcy court
where if there's a bonafide dispute as the ownership
and the trustee is in possession of the assets
the court can order the sale or disposition of the assets
and the money's taken into the bankruptcy estate
and held in escrow and that's what occurred here.
So the judge at
the bankruptcy court did not decide ownership
and certainly did not decide, the validity or propriety
of Doctor Halackey's contract claims.
With respect to the ownership issue.
Justice Cipher you're correct that the non-profit under
the regulations holds the federal funding and the assets
in trust for the benefit of the program.
Ultimately, the beneficiary is the public good.
But they hold their title as trustee.
That's it, it's not ownership lock, stock and barrel
of all of the assets.
But in the end, the ownership is really a red herring.
The plaintiff have never claimed that she owned
this laboratory or this research program.
And we're not seeking to recover for destruction
of the lab based upon ownership.
We're seeking to recover based upon breach
of contract and unexpressed...
There were two promises two reasonable expectations
that Dr. Halackey had arising from
this contract relationship.
The first was for his support.
And we haven't talked about support yet
but support is an explicit term in the contract
it's in page two of the contract.
And there was testimony that that support runs
to the benefit of the individual researcher.
That was testimony from Dr. Kalam, from Steward.
And that support, there was testimony also that entails all
of the business operations of running a research program.
So that's what Steward's obligation.
-: Why isn't the remedy for that specific performance?
-: Well Your Honor it's a choice, right.
So a plaintiff in this situation
can bring specific performance claims or can bring
a claim for damages.
By the time that the claim was brought in, certainly by
the time of trial in 2017.
Specific performance was not available to Steward's actions
and ultimately, the destruction of the lab.
-: But then why aren't the damage is limited to
who actually owns the property?
-: Well, because what the jury did here is they followed
the jury instructions and the jury instructions
were to put Dr. Halackey, the plaintiff
in the same position that she would have been prior
to the breach.
So the jury determined that in order to do that
they needed to provide damages that were adequate
to recreate the lab and to provide three years
of operational support.
The alternative remedy that's proposed by the defendant
of Sa-la-ri-o-ni would be inadequate
it wouldn't put Dr. Halackey back into the position
that she was, and--
-: I guess the problem is as from the Chief got out it
with his question.
I guess the problem with that is, why would
that go to Dr. Halackey?
That money wouldn't be hers to be able
to have a turnkey lab.
That money belongs to every family that's craving
as a cure for cancer.
-: That's correct, Your Honor and what that money is intended
to do is to get Dr. Halackey back into the place
where she can have an intact lab.
That she can continue to use that she has control over
as she had prior to the breach and that she can continue
to use to advance the science and therefore benefit
the public good.
But the recreation of the lab,
which was destroyed at Steward's hand
and the operational support to get the lab back on its feet
to get to the pre-breach position is a predicate to getting
to the point that you're stalking about justice.
-: So let me ask you the question I asked your brother.
What would you say if we were to remand
to the superior court judge with instructions
that $200,000 go, I know you want the 22 put
that aside for now.
Given the remittitur $200,000 goes to her.
The judge would then put the other $10 million
in a trust for the sole purpose of recreating
the lab so that she could not go and use that money
to buy a new house in Weston.
-: Your Honor, I can tell you and it's not binding upon
the court or it doesn't isn't really relevant
to the legal questions before the court but I can tell you
that Dr. Halackey wants to use these funds
to benefit the science drive the science.
Further her life's work in cancer research without a doubt.
-: Good but right now, there's no constraint upon
how she would how she would use the money.
-: That's a function of an award of damages in contract law.
So, she is the counterparty to the contract.
She is the person to whom Steward made this promise
of support, right.
She was the person who had a reasonable expectation
this gets to one of justice lengths points of being able
to transport this lab to another institution,
if and when she she wants to do that.
And that was the custom and practice in the industry and
that was proven at trial.
It wasn't unambiguous that Steward had a right to mix that.
The testimony in trial from Dr. Halackey and also
from Dr. Robnick, who is another researcher
who testified, was that the the custom
in the industry was that the funds follow the researcher.
The federal government and the grant making institutions
are interested in the science as it is being conducted by
the director, the individual researcher.
The funds follow the science, the director
of the research program.
If they want to approach another institution
they have to be able to bring that
and that is customarily done.
And the reason is because no institution.
No nonprofit institution that conducts research wants
to be known, as the entity that doesn't allow free movement
of clinical researchers.
-: But your brother is correct that if she were to have
if there had been no breach and she had remained
and she had gotten the support she did.
The money but the money that would have been provided to her
would not have been for her own personal benefit.
-: The money that would be provided to either the 10 million
or the 22 million under the jury award
would not be available for personal benefit
and she wouldn't need it.
She would have what she had prior to the breach.
She would have control of the research program,
the ability to move it and the reasonable expectation
of support from her host institution.
When she contracted with Steward, she testified at trial.
But this contract, there are employment provisions
within this contract it provides for $425,000
to Dr. Halackey, but Dr. Halackey testified
and the jury was entitled to rely on this testimony
that the primary thing she was seeking
was safety, stability, security
at a host institution in order to drive the science.
That is her life's work.
She's been at this for 25 years working seven days a week.
There is value there and that was testified too
by Dr. Robnick as well, to support Dr. Halackey's testimony.
-: There's no more noble profession than what she's doing
but that doesn't change the fact that
the grant awards don't belong to her.
They belong to the institution, so why did
the damages belong to her?
-: So, it's not the funding.
It's not the grant funding, which comprises the Jury Award.
So the Jury Award was comprised we believe of two elements.
And I do wanna speak to the the new trial and remittitur
but we believe that the Jury Award was comprised
of two elements, Dr. Halackey testified that
there would be $10 million required in order to get
a minimally functioning lab.
So think of that as the lab space with the equipment.
The research program sort of intact but static
at one point in time.
That's not where she was prior to the breach.
So prior to the breach, she had
a fully functioning research program that was competitive
for federal grants a of history bringing
in federal grants $24.5 million in committed funds
in federal grants to get up even close to that level.
We believe the jury was entitled to look at the contract
which contains three years of support and grant
to her damages which were reflective of those three years
of support and she testified a trial without objection,
that the support that ran through the program
was $4 million a year.
So three times four gets you to 12.
That 12 added to the tend to build out the framework
of a minimum a functioning lab gets the jury
to where they were at $22 million.
-: So what do we do with the turning to
the record appendix, Volume two page 168
the motion in limine.
Judge green has a motion limine with regard
to your again you didn't try the case either.
Your predecessors desire to offer an evidence
that there was $24.4 million loss and future grant spending.
The judge says I'm not gonna allow that in
it's speculative and it's not supported by expert testimony.
And moreover, if she had gotten those grants she
would not be the actual recipient of the funds.
She's just the principal investigator.
So, essentially the jury sort of gave her precisely
the funds which the judge said should not come in evidence
because they would be speculative
and she wouldn't be entitled to them.
-: Well, I would disagree certainly, Your Honor
with respect to the $10 million.
To see you point--
-: I'm referring to the future grant funding.
Which is the basis for her remittitur.
-: Right and the point there, Your Honor
on the motion in limine is that Dr. Halackey was
the effort was to try to qualify Dr. Halackey as an expert
to testify as to future funding the $24 million.
The 24.5 million, which I just spoke of
was a fact it was committed funds.
It's in Dr. Hunfield's testimony.
There were funds committed from Department
of Energy, NASA, NIH which amounted to $24.5 million.
So the jury could look at the contract terms
the three years know that the funds were there, intact
at the time of breach.
Available to pay so it's not speculation
it's not topic for expert testimony about future funding.
Its operating which were committed under the contract
and which were available to be funded that money was there
in the pipeline to fund the research.
-: Again not, I read you the closing of your predecessors.
No argument about anything other than
the $10 million in closing.
-: There was argument, Your Honor about
the various components of figures damaged figures
which got into evidence and, again Dr. Halackey testified
it was 3.7 to $4 million of support that was
of support funds that were run through
the program every year.
-: But are you saying that that was argued in closing?
-: I believe it was mentioned in closing.
I'm not sure if there, I know that there
was not a calculation, so--
-: So why did the judge then abuse her discretion
in deciding that the $10 million was
the only supportable figure.
-: Well, three things, Your Honor--
-: Well not the only supportable figure it's that's,
of the standard was the appropriate figure.
-: Right, so we would point to the fact that
the judge really focused on only one potential methodology
that she believe she assumed that the jury had used.
And what she believed was that the jury had looked
at this support $4 million a year, carried it out
for six years, got to 24 million close enough
to 22 million.
And judge Green decided that that was a windfall.
First error, legal error on that decision was
that she didn't explain her reasons why.
In the turnpike motors case says that a trial judge
in reducing a Jury Award needs to explain
for the appellate courts, why that remittitur
is being put in place.
Now the defendant points out that
there were other damaged figures that were discussed
in judge Green's decision.
But if you look at it she's really using those figures
to support the 10 million, as opposed to reducing
the 22 million from the 10.
That's the first legal error.
Second legal error is her job is to, the trial judge's job
is to look at all of the evidence and see it from anywhere
in the evidence, obviously, the jury could come up
with the 22 million.
And we've put forward this rationale.
$10 million, three times four is 12.
That gets the jury to $12 million.
It was not considered by the judge at the time
and therefore we think of that as the second error.
The third legal error and this gets to the FIRREA case
which the judge relied on considerably for the award
of damage, generally and we believe that was proper.
But the judge misread the FIRREA case to believe
that operational support was not something that was awarded
in that case, but it was.
If you look at the FIRREA decision, you'll see that
there's reference to fringe benefits and salaries
of the employees, maintenance of the animals, the animals
were basically the specimens in that case.
So those are forward looking.
There's some runway and there's actually
an affidavit that's in the record at RA 1362
from the expert who testified in the FIRREA case.
And the affidavit makes playing that the Jury Award
of the $2.9 million in that case was comprised
of startup costs and uninterrupted support for five years.
So three legal errors from the trial judge and considering
the remittitur and, frankly Your Honor
a failure to defer to the fact finding
and to the discretion of the jury.
And we believe that the evidence and the arguments support
this and that's a reasonable Award, given the nature
of the damage caused by Stuart here.
-: The prejudgment interest actually cuts into
a serious amount of money.
Doesn't the plaintiff have to prove the breach date.
It's not enough for the judge to instruct the jury
that December 31st is the breach date.
So why you're entitled to the prejudgment interest
from that day.
-: Under the statute, the date needs to be established.
So, here we had a situation where
the judge instructed the jury, as you point out
that Steward, I'm sorry Dr.Halackey is alleging
that Steward breached the contract on December 31 2012.
And it was undisputed.
First, there was no objection to that instruction
but secondly, there was undisputed that that was the day
when Steward withdrew as the sole member of the non-profit
and at that point in time under Steward's own testimony,
they abandoned the research.
They had no more connection or relationship
with Dr. Halackey.
So, the jury was asked them to check the box yes
if it determined that Steward breached and it did.
So, the breach is explained to the jury
as occurring on a specific date.
They check the box, yes, the jury is presumed
to follow the jury instructions.
So then it's presumed that there's a finding by the jury
of a certain date.
And we would direct the court to the Morgan case.
Recognizing it's a case from the Appellate Division
but I think it's the most analogous case because there
there was an implied finding and the court makes it plain
that the trial judge there was a bench trial.
There was only one possible date of breach
which was the date of the closing
in the real estate transaction, which was the same here.
There's only one possible date. It was undisputed.
And when the judge found liability and found a breach
the Appellate Division said that that was
an implied finding that it occurred on
that one possible date.
-: Two questions on that.
The judge said that you allege that it was 12/31/2012.
Which was true you did allege that.
Why should they object to with characterization
of what you allege?
-: Well, because it imports that date.
It imports that date into the jury instruction so that
if it's true and it's undisputed, perhaps it's just
the flip side of saying it's undisputed
that they didn't object it--
-: But is that that's a second question.
If they had left, they continued
to provide substantial funds after they left Steward.
Took a while before Steward backed off.
So, is it so clear that that is the pertinent date
when the issue is whether they stopped supporting it
and it seems a little bit less clear to me
when they stopped supporting it as opposed to when
they no longer were a member of the nonprofit?
-: So there were there were two counts remember.
So it's breach of contract and breach of the covenant
of implied good faith and fair dealing.
So the breach of contract we alleged occurred at the time
of the removal, that's when Steward cut off the support.
The damages--
-: That's when they left that's when they withdrew.
-: That's when they withdrew as I remember--
-: Then you agree that they did continue
to provide substantial funds even after they left?
-: They did through GRI, correct.
-: Okay, so support is little less clear.
-: Understood, Your Honor, I look at the conduct
which occurred after December 31 2012 as really exacerbating
the damages, but not the date of the breach.
So if a date of a breach a data breach has to be fixed
in a contract case, one way or the other.
And the breach here occurred when they withdrew
as the member, the damages got worse because
as you know the breach of the covenant good faith
and fair dealing speaks to the performance of the contract
and they without a doubt, barred
or thwarted Dr. Halackey's efforts to obtain the fruits
of the contract by their conduct after
the date of the breach.
So I think that that would speak to that
but the date of the breach of the contract, we allege
and the jury was instructed, it was a date specific.
-: Let me ask you a question that Mr. Martin raises
which is a, point that worries me too.
We have a number of cases and I expect we'll have more
in which members involved in important research
at various academic institutions are terminated
or caused to lose their support,
either because of sexual harassment or other sources.
Difficult cases, when that happens in every case
when that happens, can the professor who ultimately says
well, they actually were not fair in doing that to me
are they going to be able to obtain damages of the sort
that you describe the benefit of all
of their research funding.
Which could become millions of dollars
and if that's the case, is that gonna mean
that we've raised the stakes to remove professors
who may be engaged in sexual harassment or other conduct
which may warrant the removal?
-: Your Honor, it's a fair question.
I think that this is a very unique case.
And it turns on what Dr. Halackey brought
to the program and what her expectation was, so.
It took her years to develop this lab.
25 years worth of work.
She brought that to the contract.
This is the type of situation where the remedy that
the jury reached here is the only remedy
because the alternative to that Your Honor
is some lesser remedy of the salary.
But the remedy here is the only one which
would put Dr. Halackey back into the position she was prior
to the breach.
-: What about the Tort Claims?
-: So, Your Honor, I don't--
-: Beg only remedy what about a tort claim.
-: So a tort claim, of what tortious interference
with contract you can interfere with your own contract.
I'm not sure what tort remedy there may be.
But in any event, we're faced with a substantial
and serious breach of contract and substantial damages
that flow from that breach of contract.
-: And with the same remedy be appropriate
if she had been terminated for some alleged misconduct?
-: Well, that wouldn't be a breach of
the obligation to support--
-: What if it were determined
that the termination was ultimately found to be unjust
because of a failure of proof or
whatever else which happens--
-: Well, Your Honor, I think this gets to also that
it's not just the use of the lab, right.
The use of the lab isn't the only right
that Dr. Halackey has.
Again, she brought this lab to the program, she
had control over this over this research program.
She was the one who applied for the grants.
And she had the right to transport this program with her if
and when she wanted to change jobs.
I don't think that that would always be the case.
It's not just a research scientist who's engaged
in lab work.
This is not just an employment contract.
It's much more and the jury was entitled to find that.
It's really an affiliation agreement.
She's bringing her research program.
She brought a research program
to Steward's predecessor seven years earlier.
And this contract was as a result of negotiation
and again, to her having that state stability and security
in a research institution was critical.
I don't think those facts are going
to present themselves all the time.
No, Your Honor these facts having to do with the breach
and Steward's purposeful and egregious conduct
here are not going to reappear time and time again.
So the magnitude of the destruction here which drives
the size of the Jury Award, I don't think it's something
that the court is going to see often.
-: Okay, thank you.
-: Thank Your Honor.