Opinion
No. CV 09-5029616
May 20, 2010
MEMORANDUM OF DECISION REGARDING MOTION TO STAY PROCEEDINGS #108 AND MOTION IN LIMINE #117
On January 20, 2010 the court heard argument and considered the defendant's, Protein Science Corporation, "PSC," December 30, 2009 Motion To Stay Proceedings and plaintiff's, Emergent Manufacturing Operations Meriden, LLC, "EMOM," January 13, 2010 Motion in Limine and Judicial Notice in connection with the captioned case. The plaintiff seeks, pursuant to CGS 52-278(d) the prejudgment remedy of replevin of goods and chattels in defendant's possession, "immediate possession of the property described in Exhibit A attached hereto including by way of prejudgment relief." (See plaintiff's Application for Prejudgment Remedy and Proposed Complaint dated June 9, 2009) but that a hearing on that matter was postponed pending the outcome of these preliminary motions.
The defendant moves the court to stay the proceedings in Connecticut due to the application of the prior pending action doctrine. The plaintiff opposes the motion to stay arguing that the prior pending action doctrine is inapplicable.
In Bayer v Showmotion, 292 Conn. 381, 397 (2009), the Connecticut Supreme Court set forth the standards for applying the prior pending action doctrine. The Court held that a "trial court must determine in the first instance whether the two actions are: (1) exactly alike, i.e., for the same matter, cause and thing, or seeking the same remedy, and in the same jurisdiction; (2) virtually alike; or (3) insufficiently similar to warrant the doctrine's application."
In the spring of 2008 the parties', EMOM, acting through a subsidiary entity, and PSC, agreed, "Loan Agreement," to a $10,000,000 loan and signed a letter of intent to allow an asset purchase by the plaintiff's parent company, Emergent BioSolutions, Inc., "EBSI," of the assets of PSC. The asset purchase price has been estimated to be between $60,000,000 and $75,000,000 according to counsel. The parties agree that the $10,000,000 of loans were made by the plaintiff to the defendant, that the asset purchase agreement was never ratified and approved by PSC shareholders as required by the "Loan Agreement," that the due date for repayment of the loan has passed and that the defendant has failed to pay the loan in accordance with the terms and conditions of the loan. The defendant has raised certain legal and equitable defenses to the repayment of the loan.
The parties have pending litigation arising out of the above-described transactions in Federal District Court of Connecticut, New York State Supreme Court and, formerly, had a Chapter 7 Involuntary Bankruptcy proceeding in the United States Bankruptcy Court, District of Delaware, docket #09-12151, instituted by EMOM against PSC, as well as the instant case.
PSC maintains that the New York state court action, Emergent BioSolutions, Inc., and Emergent Mfg. Operations Meriden, LLC v Protein Sciences Corporation, Index No. 650221/2008, filed in 2008, "NY action," is "virtually alike," see Bayer v Showmotion, supra, the instant matter and hence this court should stay these proceeding. This court agrees.
The prior pending action doctrine is a rule of justice and equity, generally applicable, and always, where the two suits are virtually alike. In determining whether the suits are virtually alike, the court determines, "whether they are brought to adjudicate the same underlying rights." Bayer v. Showmotion, supra 399. "In order to determine whether the actions are virtually alike, we must examine the pleadings . . . to ascertain whether the actions are brought to adjudicate the same underlying rights of the parties . . ." Selimoglu v. Phimvongsa, 119 Conn.App. 645, 650-51 (2010).
Both the "NY action" and the instant case seek, inter alia, the determination of these same parties' rights to certain collateral pledged in connection with the Loan Agreement, see the NY Action, First Amended Complaint, Count III, paragraph 137 and Count IX, paragraph 174 "Under Section 7(a) of the Loan Agreement, plaintiffs have the right to take immediate possession of the collateral pledged in that agreement(.)" and the instant case, Amended Complaint Paragraph 20, "The plaintiff, by virtue of the aforesaid security interest evidenced by the Loan Agreement and the UCC-1, is entitled to immediate possession of the property described in Exhibit A . . ." While the NY action seeks additional and broader relief than is sought in the instant action, the relief sought in the instant action is simply a subset of the relief sought in the New York action. The NY action was filed well before the instant case.
In Sauter v. Sauter, 4 Conn.App. 581, 584-5 (1985) the court noted, "(I)t makes little sense, however, for two actions for the same relief to be litigated in parallel, with the plaintiff in each seeking to rush to judgment. In the interests of judicial economy, a court may, in the exercise of its discretion, order that the second action be stayed during the pendency of the first action, even though the actions are pending in different jurisdictions."
This court notes that the plaintiff's parent corporations, EBSI, CEO and CFO have, through an SEC filing, a 10-Q Financial Statement to shareholders, investors and the public, indicated in November of 2009 that EMOM is fully secured in connection with the instant litigation, and, EMOM appears to have comprehensive agreements with PSC securing EMOM's loan and the damages that may flow to EMOM in connection with the above-described cases. Further, in the PJR that underlies this proceeding, EMOM seeks replevin of goods and chattels that PSC pledged in connection with the "Loan Agreement." As noted above, the "Loan Agreement" described a $10,000,000 (ten million dollar) series of loans from EMOM to PSC, but the parties agreed at oral argument that the value of the goods and chattels PSC pledged ranged between $858,000 (eight hundred and fifty-eight thousand dollars) according to a Thomas Industries appraisal done by PSC, to EMOM's counsel's speculation, offered only when pressed during oral argument by the undersigned, that at a `UCC sale or auction' the value of the pledged goods and chattels might be a small fraction — estimating 30 to 40% — of the $858,000 appraised value. A stay of proceedings in the instant matter creates no harm to EMOM that is apparent to EMOM's parent company's CEO and CFO as of November 2009, see footnote #1.
"In the event that PSC does not voluntarily repay the amounts due, the Company believes that the value of its collateral as a secured creditor is in excess of the Note and related interest and a loss is not probable." Defendant's #110, 12-30-09, Exhibits, H, Emergent BioSolutions, Inc., SEC Quarterly 10-Q Statement, page 7-8, dated 11-05-09.
In sum, EMOM is apparently a fully secured creditor seeking a judgment in the New York State Supreme Court action, inter alia, for PSC's alleged breach of the `Loan Agreement.' PSC has raised several legal and equitable defenses to that action. The instant action involves the same parties as the NY action, adjudicating some of the same rights between the same parties, seeking some of the same remedies in both actions and under the same `Loan Agreement' with the same legal and equitable defenses raised here as in the NY action.
The goals of judicial economy, both for the litigants and. the judicial system, consistency and finality are best served by requiring a stay of proceedings in this matter while the issues between the parties are resolved in the first forum chosen by EMOM — the New York State Supreme Court.
Wherefore, the Court grants the Motion for Stay, #108, pending the final judgment of the NY action, but maintains in full force and effect all orders previously entered vis a vis the conduct of the parties, including, but not limited to, the 6-19-09 order of the court, #101.25, a stipulation of the parties approved by Cosgrove, J. and the 11-04-09 order of the court, #105, a stipulation of the parties approved by Zemetis, J.
The plaintiff's January 13, 2010 Motion in Limine and for Judicial Notice request relief relevant to proof of PSC's indebtedness to EMOM and the perfection of EMOM security interest in collateral PSC pledged in connection with the Loan Agreement as the same are relevant to EMOM's Application for Prejudgment Remedy. Ruling on this motion, at this time, may unnecessarily complicate the proceeding in the NY action. The plaintiff's requests impact the defendant's ability to present evidence relevant to the aforementioned claim of legal and/or equitable defense to enforceability of the Loan Agreement. In light of the granting of the Motion For Stay of Proceedings, the court will not address this motion.
Wherefore, the Court declines to rule on the plaintiff's Motion in Limine at this time.
Lastly, the court appreciates the excellent legal work submitted in connection with these matters from counsel for both sides of this case. The thoughtful analysis, the thorough preparation and the excellent presentation were in the finest traditions of the bar.