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1 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP A Limited Liability Partnership Including Professional Corporations 2 MICHAEL H. AHRENS, Cal. Bar No. 44766 3 ORI KATZ, Cal. Bar No. 209561 MICHAEL M. LAUTER, Cal. Bar No. 246048 4 TIMOTHY C. PERRY, Cal. Bar No. 248543 Four Embarcadero Center, 17th Floor 5 San Francisco, California 94111-4106 Telephone: 415-434-9100 6 Facsimile: 415-434-3947 7 Attorneys for ARRIVA PHARMACEUTICALS, INC. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA On Appeal from the United States Bankruptcy Court for the Northern District of California Hon. Edward D. Jellen

ALPHAMED PHARMACEUTICALS CORP., Claimant-Appellant, v. ARRIVA PHARMACEUTICALS, INC., Reorganized DebtorAppellee.

No. 08-00691-SI APPELLEE'S BRIEF [ALPHAMED CLAIM APPEAL] Date: July 24, 2008 Time: 3:30 p.m. Location: Courtroom 10, 19th Floor 450 Golden Gate Ave. San Francisco, CA 94102

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1 2 3 I. 4 II. 5 III. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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TABLE OF CONTENTS Page STATEMENT OF THE CASE .................................................................................. 1 STANDARDS OF REVIEW ..................................................................................... 2 STATEMENT OF THE FACTS ................................................................................ 3 A. B. C. D. E. F. IV. V. The Background of AlphaMed's Disallowed Claim. ...................................... 3 The Arizona Court Upholds the Protease License and Issues Injunctions Against the Lezdeys. .................................................................... 3 The Northern District of California Recognizes the Arizona Court's Rulings............................................................................................................. 5 Arriva Prevails Against Similar Claims by AlphaMed in Florida. ................. 5 Treatment of AlphaMed's Claim in the Bankruptcy Court. ............................ 7 This Appeal. .................................................................................................... 9

SUMMARY OF THE ARGUMENT ......................................................................... 9 ARGUMENT............................................................................................................ 10 A. The Bankruptcy Court Did Not Err by Disallowing AlphaMed's Claim Rather than Holding Adjudication of It in Abeyance Pending the Resolution of the Eleventh Circuit Appeal.................................................... 10 1. 2. B. The Bankruptcy Court and the Bankruptcy Code Provided for AlphaMed's Appeal Rights................................................................. 10 The Plan Confirmation Would Have Been Severely Affected by AlphaMed's Suggested Delay........................................................ 12

The Bankruptcy Court Did Not Err by Holding that the Florida Jury's Liability Findings Were Overturned. ............................................................ 14 1. 2. AlphaMed Misconstrues the Basic Effect of a JMOL, which is to Completely Overturn a Jury Verdict. ............................................. 15 In Addition, the Florida District Court's Opinion Granting the JMOL Expressly Provided for the Vacatur of the Entirety of the Jury Verdict. ................................................................................. 16 -i-

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 VI.

3.

AlphaMed's Strained Reading of Case Law is Incorrect and Inapt.................................................................................................... 18

CONCLUSION ........................................................................................................ 22

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1 2 Federal Cases

TABLE OF AUTHORITIES

3 Air-Sea Forwarders, Investment v. Air Asia Co., LTD, 880 F.2d 176 (9th Cir. 1989)........................................................................................ 19 4 AlphaMed v. Arriva, 432 F. Supp. 2d 1319 (S.D. Fla. 2006) ................................................ 2, 6, 7, 17, 18, 20 5 6 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1981) ..................................................................................................... 15 7 Artis v. Hitachi Zosen Clearing, Inc., 967 F.2d 1132............................................................................................................... 21 8 9 Barber v. Whirlpool Corp., 34 F.3d 1268 (4th Cir. 1994)........................................................................................ 20 10 Berry v. United States, 312 U.S. 450 (1941) ............................................................................................... 19, 20 11 12 Celotex Corp. v. Catrett, 477 U.S. 317 (1986) ..................................................................................................... 19 13 Christopher v. Florida, 449 F.3d 1360 (11th Cir. 2006).................................................................................... 15 14 15 Federated Department Stores, 144 B.R. 989 (Bankr. S.D. Ohio 1992)........................................................................ 11 16 Firestone Tire and Rubber Co. v. Pearson, 769 F.2d 1471 (10th Cir. 1985).................................................................................... 19 17 18 Forrett v. Richardson, 112 F.3d 416 (9th Cir. 1997)........................................................................................ 15 19 In re Hamada, 291 F.3d 645 (9th Cir. 2002)........................................................................................ 14 20 21 Harris Trust & Sav. Bank v. John Hancock Mutual Life Insurance, 970 F.2d 1138 (2d Cir. 1992)....................................................................................... 22 22 In re Harrison, 71 B.R. 457 (Bankr. D. Minn. 1987) ........................................................................... 13 23 24 In re Hill, 811 F.2d 484 (9th Cir. 1987)........................................................................................ 13 25 In re Park-Helena Corp., 63 F.3d 877 (9th Cir. 1995)............................................................................................ 2 26 27 In re Spring Garden Foliage, Inc., 17 B.R. 882 (Bankr. M.D. Fla. 1982) .......................................................................... 11 28
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1 In re Timbers of Inwood Forest Associates, Ltd., 808 F.2d 363 (5th Cir. 1987), aff'd, 484 U.S. 365 (U.S. 1988) ................................... 14 2 Jorgensen v. Cassiday, 320 F.3d 906 (9th Cir. 2003)........................................................................................ 16 3 4 Lifewise Master Funding v. Telebank, 374 F.3d 917 (10th Cir. 2004)................................................................................ 20, 21 5 NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984) ..................................................................................................... 14 6 7 Pordy v. Land O'Lakes, Inc., 97 Fed. Appx. 921, 926 (Fed. Cir. 2004) ............................................................... 15, 20 8 Ross v. Rhodes Furniture, 146 F.3d 1286, 1289 (11th Cir. 1998).......................................................................... 18 9 10 Sentinel Trust Co. v. Universal Bonding Insurance Co., 316 F.3d 213 (3d Cir. 2003)......................................................................................... 22 11 Sousa v. Miguel, 32 F.3d 1370 (9th Cir. 1994).......................................................................................... 2 12 13 Tripati v. Henman, 857 F.2d 1366 (9th Cir. 1988)...................................................................................... 16 14 United Sav. Association v. Timbers of Inwood Forest Associates, 484 U.S. 365 (U.S. 1988)............................................................................................. 13 15 16 Waters v. Young, 100 F.3d 1437, 1441 (9th Cir. 1996)............................................................................ 18 17 State Cases 18 Cook v. State, 921 So. 2d 631 (Fla.Ct.App. 2005) .............................................................................. 21 19 20 Docketed Cases 21 Wachter v. Lezdey, Case No. CV-99-009335................................................................................................ 7 22 Federal Statutes 23 Bankruptcy Code § 502(b) .................................................................................................................. 12, 13 24 § 502(c) .............................................................................................................. 8, 12, 13 § 502(j) ..................................................................................................... 1, 8, 11, 12, 13 25 § 1126(c) ...................................................................................................................... 12 § 1129(a)(8).................................................................................................................. 12 26 27 28
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1 Federal Rules of Civil Procedure 50...................................................................................................................... 16, 19, 21 50(a) ............................................................................................................................. 15 2 50(b) ............................................................................................................. 6, 15, 18, 19 56.................................................................................................................................. 19 3 4 42 U.S.C. § 1981................................................................................................................ 21 5 Title VII of the Civil Rights Act of 1964 .......................................................................... 21 6 State Statutes 7 Fla. Stat. § 688.004 ............................................................................................................ 17 8 Other Authorities 10 A. Miller & E. Cooper, FEDERAL PRACTICE AND PROCEDURE § 4433, at 308 (1981) ..... 16 11 RESTATEMENT (SECOND) OF JUDGMENTS § 13 (1982)...................................................... 16 12 H. Rep. No. 595, 95th Cong. 1st Sess. 220 (1977)............................................................ 14 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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9 9 MOORE'S FEDERAL PRACTICE AND PROCEDURE § 50.02 (3d ed. rev. 2007).................. 16

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1 2

I. STATEMENT OF THE CASE AlphaMed Pharmaceuticals Corp. ("AlphaMed") filed a proof of claim (the "Claim")

3 in the bankruptcy case of Arriva Pharmaceuticals, Inc. ("Arriva") on October 11, 2007. 4 (Appellant's Combined Appendix1, 043.) The Claim was based entirely upon a jury verdict 5 in favor of AlphaMed that had been overturned when the presiding court issued a judgment 6 as a matter of law in favor of Arriva. (AA 043-058; 256-57.) Arriva objected to the Claim 7 and, after a hearing on Arriva's objection, the United States Bankruptcy Court for the 8 Northern District of California (the "Bankruptcy Court") disallowed the Claim and 9 alternatively estimated it at zero for the purposes of voting on Arriva's plan of 10 reorganization. (AA 518, l.14-19; 521, l.7-11.) The Bankruptcy Court's order disallowing 11 the Claim (the "Disallowance Order") was entered on December 27, 2007. (AA 431-32.) 12 AlphaMed contends that the Bankruptcy Court erred in disallowing its Claim

13 because: (i) it should have refrained from adjudicating AlphaMed's Claim until the appeal in 14 the Eleventh Circuit is resolved; and (ii) it erred in holding that jury findings from the 15 Florida litigation were overturned. The Bankruptcy Court was correct on both counts. 16 AlphaMed's first contention is in direct contrast with the provisions and purposes of

17 the Bankruptcy Code. The Code recognizes that time is of the essence with respect to 18 distressed debtors, and provides mechanisms for moving onwards with plan confirmation 19 while addressing the interests of claimants with disputed claims. The Bankruptcy Court 20 utilized those methods and also specifically provided that AlphaMed's Claim would be 21 revisited under Bankruptcy Code Section 502(j) in the event that it prevails in the Eleventh 22 Circuit appeal. (AA 432.) The Bankruptcy Court also granted AlphaMed relief from stay to 23 pursue such appeal (AA 512), and provided that distribution of the unsecured claims pool 24 would be stayed until the resolution of said appeal. (Appellee's Combined Appendix2, 25 Hereinafter, citations to Appellant's Combined Appendix shall be in the following form: (AA 001.) 27 2 Hereinafter, citations to Appellee's Combined Special Appendix shall be in the following 28 form: (SPA 001.) 26
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1 133:9-12; 154-55: § 7.2.) Thus, AlphaMed's Claim was dealt with fairly and equitably as 2 contemplated under the Bankruptcy Code. 3 AlphaMed's second argument is also incorrect for three reasons. First, the Florida

4 District Court granted Arriva judgment as a matter of law ("JMOL"). (AA 256-57.) The 5 basic nature of a JMOL is to overturn a jury's findings as lacking a "legally sufficient 6 evidentiary basis." Second, AlphaMed misunderstands the nature of the Florida District 7 Court's ruling. AlphaMed attempts to argue that the issue of damages was somehow 8 separate from liability. (Opening Brief, 6:13-16.) However, the Florida District Court 9 specifically held that damages were an essential element of each cause of action alleged by 10 AlphaMed, such that AlphaMed's failure to prove any damages whatsoever necessarily 11 meant that it failed to carry the burden of proof with regard to each of its causes of action. 12 AlphaMed Pharmaceuticals Corp. v. Arriva Pharmaceuticals, Inc., 432 F. Supp. 2d 1319, 13 1334, 1352 and 1353 (S.D. Fla. 2006). In addition, though unnecessary, the Florida District 14 Court derided the jury findings in several passages, stating that the jury findings were 15 against the "great weight of the evidence" and noting that the jury failed to follow 16 instructions. Id. at 1356. Third, the case law cited by AlphaMed is inapt ­ none of the cases 17 support the contention that a jury's findings survive a JMOL. And even if they did, the 18 standard cited by AlphaMed ­ that a jury's findings survive if they are not impugned ­ is 19 clearly not met in this case given that that Florida District Court conditionally granted a new 20 trial to Arriva and found the jury's verdict to have been against the great weight of the 21 evidence and a product of a failure to follow instructions. 22 The Bankruptcy Court did not err in disallowing AlphaMed's Claim. The

23 Disallowance Order should be upheld. 24 25 II. STANDARDS OF REVIEW An appellate court reviews a bankruptcy court's findings of fact under the clearly

26 erroneous standard, Sousa v. Miguel, 32 F.3d 1370, 1372 (9th Cir. 1994), and its conclusions 27 of law de novo. In re Park-Helena Corp., 63 F.3d 877, 880 (9th Cir. 1995). 28
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1 2 A. 3

III. STATEMENT OF THE FACTS The Background of AlphaMed's Disallowed Claim. In the early 1990s, Dr. Allan Wachter and John Lezdey invented and jointly acquired

4 patents for medical technologies related to the treatment of inflammation. (AA 184.) In 5 1992, Dr. Wachter and Lezdey transferred their interests in the patents to Sonoran Desert 6 Chemicals, LLC ("Sonoran"). Sonoran was 50% owned by Wachter, and 50% owned by 7 John Lezdey. (AA 184.) Shortly thereafter, Dr. Wachter and Lezdey formed Protease 8 Sciences, Inc. ("PSI"), authorizing it to enter into licensing agreements on behalf of Sonoran. 9 (AA 109, 242.) 10 In 1997, Wachter, Lezdey, Philip Barr and David Kent formed Arriva, then known as

11 AlphaOne Pharmaceuticals, Inc. (AA 240.) Arriva seeks to develop protease inhibitors for 12 treatment of respiratory diseases. Its main product under development is the biotherapeutic 13 recombinant alpha 1-antitrypsin, commonly called "rAAT," which the company 14 manufactures in engineered yeast cells. Arriva also has been active in developing the 15 protease inhibitors Ilomastat and SLAPI. 16 On April 16, 1998, PSI and Arriva entered into a License Agreement (the "Protease

17 License") by which PSI granted to Arriva an exclusive license to exploit certain patents 18 related to rAAT as set forth therein (the "Protease Patents"). 19 B. 20 21 The Arizona Court Upholds the Protease License and Issues Injunctions Against the Lezdeys. After the execution of the Protease License, the Lezdeys3 began to make the first of

22 their many and repeated claims that the Protease License was invalidly executed. These 23 claims have been made by various of the Lezdeys in several courts, and the result has been a 24 consistent line of judgments in favor of Arriva and the validity of the Protease License. 25 26 The "Lezdeys" shall mean collectively John Lezdey; Noreen Lezdey; Jarett Lezdey; Darren 27 Lezdey; AlphaMed Pharmaceuticals Corp.; J.L. Technology, L.P.; J.L. Technology Ltd.; Jamie Holdings, LLC; J & D Science Inc.; and certain of their respective successors and assigns. 28
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1

First, Allan Wachter, with Arriva's financial support, brought suit in the Superior

2 Court of Maricopa County, Arizona (the "Arizona Court") seeking, among other things, 3 declaratory relief and injunctions that would put these claims of the Lezdeys to rest. 4 (AA 242.) The Arizona Court first found the Protease License to be valid on February 3, 5 2000, in the context of issuing a preliminary injunction against John, Darren, and Jarett 6 Lezdey, J&D Science, Inc. and J.L. Technology Limited (the "Preliminary Injunction"). 7 (AA 242-43.) The Preliminary Injunction enjoined said parties and "any other persons 8 acting for them or with them" from "acting or speaking, or purporting to act or speak, on 9 behalf of [PSI] or Sonoran without Plaintiffs' [Dr. Wachter's] express consent." (AA 243.) 10 The Preliminary Injunction remains in force to this day. 11 Further, on February 22, 2002, the Arizona Court again entered a finding in favor of

12 the validity of the Protease License in the context of issuing a permanent injunction against 13 Darren Lezdey, Jarett Lezdey, and J.L. Technology, L.P. (the "Permanent Injunction" and 14 together with the Preliminary Injunction, the "Arizona Injunctions"). (AA 244.) John 15 Lezdey was not made subject to the Permanent Injunction because he filed for bankruptcy 16 on the eve of its issuance. (AA 243-44.) The Permanent Injunction enjoins the parties 17 subject thereto "and any other persons or entities acting in concert with them" from "acting 18 or speaking, or purporting to act or speak, on behalf of" PSI or Sonoran without 19 Dr. Wachter's "express written consent." (AA 174-75.) In addition, the Permanent 20 Injunction enjoined these same parties "and any other persons or entities acting in concert 21 with them" from "taking any actions in any capacity to give effect to (or to draw to 22 themselves or any entity, including AlphaMed Pharmaceuticals, Inc., any benefit from) the 23 invalid License Agreements between" PSI and AlphaMed. (AA 175.) 24 After the entry of the Permanent Injunction, the Arizona Court entered an "Under

25 Advisement Ruling" against John Lezdey. In that Ruling, the court noted, among other 26 things, that John Lezdey had failed to pay court fines, failed to cure contempt citations and 27 taken many actions that constituted a violation of the Preliminary Injunction. Such actions 28 included speaking for Sonoran in a patent interference proceeding in the Patent and
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1 Trademark Office, appearing in a European Court of Patent Appeals without Dr. Wachter's 2 consent, and contacting a group of Arriva investors without Wachter's consent. The Ruling 3 ordered John Lezdey to surrender himself to the Maricopa County Sheriff's Office for 4 incarceration if he did not purge the contempt by a certain date. (AA 245.) 5 C. 6 The Northern District of California Recognizes the Arizona Court's Rulings. In May 1999, Arriva filed a complaint in this Court, before United States District

7 Judge Illston. (AA 185.) In that case, Judge Illston ultimately granted Arriva's motion to 8 dismiss the defendants' counterclaims for declaratory relief. (AA 195.) Judge Illston 9 conditioned this dismissal on Arriva's voluntary dismissal of certain claims. (AA 195.) In 10 reaching this conclusion, the Court noted: 11 12 Lezdey knew the material terms and conditions of the [Protease] License Agreement, advised Wachter that the Agreement was valid, and approved Wachter's execution thereof.

13 (AA 186.) In addition, Judge Illston noted the Arizona Court had determined "Arriva's Protease 14 License is 'valid and enforceable.'" (AA 186.) Judge Illston further observed Lezdey's disregard 15 of the Arizona Court's contempt orders. (AA 188.) Applying the Brilhart doctrine, the Court 16 found that after sustaining "several adverse rulings in Arizona," the Lezdeys engaged in forum 17 shopping ­ "opportunistic maneuvering" that "the Ninth Circuit has discouraged." (AA 193.) 18 Consequently, Judge Illston held that the Arizona Court's holding that Arriva's Protease License 19 was valid rendered all other judicial proceedings duplicative: "The Court concludes that the 20 Protease/Arriva license issue has already been extensively litigated in the Arizona Court, and 21 that any litigation in this court would be duplicative." (AA 190.) 22 D. 23 Arriva Prevails Against Similar Claims by AlphaMed in Florida. In 2003, AlphaMed filed suit against Arriva in the United States District Court for the

24 Southern District of Florida (the "Florida District Court"). In 2005, the lawsuit proceeded to 25 trial on three claims4: (1) misappropriation of trade secrets, (2) tortious interference with 26 27 Note that contrary to AlphaMed's contention (Opening Brief, 3:1-3), the validity of the Protease License was not an element of any of the causes of action in the Florida litigation, 28
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1 business; and (3) unfair competition. See AlphaMed v. Arriva, 432 F. Supp. 2d 1319, 1329 2 (S.D. Fla. 2006). Initially, a jury returned a verdict in favor of AlphaMed. Arriva timely 3 moved for judgment as a matter of law under Rule 50(b) of the Federal Rules of Civil 4 Procedure. District Judge Cecilia Altonaga granted Arriva's motion for JMOL, ordering as 5 follows: 6 7 8 (AA 198.) 9 10 Judge Altonaga issued a published opinion explaining why she granted JMOL to [I]t is hereby ORDERED AND ADJUDGED that judgment is entered in favor of [Arriva] . . . and against Plaintiff AlphaMed Pharmaceuticals Corp. Plaintiff shall take nothing from Defendants, and the action is DISMISSED on the merits.

11 Arriva. See AlphaMed v. Arriva, 432 F. Supp. 2d 1319, 1329 (S.D. Fla. 2006). Contrary to 12 AlphaMed's assertion that the JMOL was merely a "narrow" form of "post-trial relief" 13 (Opening Brief, 6:13-16), which argument misunderstands the nature of a JMOL, Judge 14 Altonaga explained that AlphaMed's failure to prove the existence of any damages whatsoever 15 was a failure to prove a necessary element of each of its causes of action. 432 F.Supp.2d at 16 1334, 1352 and 1353. This much can be gleaned merely by scanning the headings of the 17 judge's opinion, such as: "AlphaMed's Failure to Prove Damages Requires the Court to 18 Vacate the Jury's Finding of Liability on the Claim for Unfair Competition." Id. at 1353. 19 In addition, Judge Altonaga also granted Arriva's alternative motion for a new trial.

20 Id. at 1356. In so ruling, Judge Altonaga noted that such a conditional ruling on a new trial 21 "does not affect the finality of the judgment in Arriva's favor." Id. at 1356, n.54. In the 22 context of granting the new trial motion, Judge Altonaga gave further evidence that she 23 intended to completely overturn the jury verdict. The judge's reasons for granting the 24 conditional new trial motion were twofold: "the jury verdict was against the great weight of 25 the evidence" and "the jury failed to follow instructions." Id. at 1355-1356. As to the 26 27 and thus any comments made by the jury on the overturned jury verdict form were superfluous. 28
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1 former, Judge Altonaga explained that the jury verdict was against the great weight of the 2 evidence "[f]or the reasons set forth above", which is a reference to the failure to prove the 3 damage element of each claim. Id. at 1355. As to the latter, the court noted that the jury's 4 failure to follow instructions was "inappropriately invited" by AlphaMed's closing argument. 5 Id. at 1356, n.55. Concluding the opinion, Judge Altonaga stated that "For all of the reasons 6 addressed above, the Court cannot allow the jury's verdict in this case to stand." Id. at 1358. 7 Finally, it is worth noting that in the course of her opinion, Judge Altonaga also gave

8 preclusive effect to the findings of the Arizona Court, stating that: "John Lezdey's assertion 9 that the license agreement was executed without his approval is contradicted by a permanent 10 injunction entered in Wachter v. Lezdey, Case No. CV-99-009335 . . . ." AlphaMed Pharms. 11 Corp. v. Arriva Pharms., Inc., 432 F. Supp. 2d at 1324, n.6. 12 AlphaMed has since appealed the JMOL, which appeal is currently pending before

13 the United States Court of Appeals for the Eleventh Circuit. 14 E. 15 Treatment of AlphaMed's Claim in the Bankruptcy Court. Despite this consistent line of court rulings, the Lezdeys continued to make their

16 baseless assertions to rights in Arriva's intellectual property portfolio, in particular in a suit 17 filed by various Lezdey entities against Arriva in Nevada state court in June of 2007. Due to 18 the effect of these continued baseless claims on Arriva's ability to raise the funding it needs to 19 bring its products to market, Arriva voluntary filed for bankruptcy on August 29, 2007 under 20 Chapter 11 of Title 11 of the United States Code. Arriva's bankruptcy case was filed in the 21 United States Bankruptcy Court for the Northern District of California, as Case No. 07-42767, 22 and was presided over by Hon. Edward D. Jellen, United States Bankruptcy Judge. 23 Undeterred by the JMOL issued against it by the Florida District Court, AlphaMed

24 filed a proof of claim in Arriva's bankruptcy case based entirely on the overturned jury 25 verdict from the Florida action. (AA 043.) AlphaMed's Claim, filed on October 11, 2007 as 26 claim number 14 on the claims register for the bankruptcy case, was in the stated amount of 27 $78,000,000 ­ the amount of the overturned jury verdict. (AA 043.) The only basis for the 28
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1 Claim indicated on the proof of claim was "Legal", and the only item attached to the proof 2 of claim form in support of the Claim was the overturned jury verdict form. (AA 046-058.) 3 Arriva responded by filing a timely objection to the Claim as part of its Omnibus

4 Objection (the "Objection") to various Lezdey-related claims on November 7, 2007. 5 (AA 200-207.) In the Objection and the Memorandum of Points and Authorities filed in 6 support of the Objection, Arriva explained that, among other things, the jury verdict form 7 could not serve as a valid basis for a claim in bankruptcy because the jury verdict had been 8 overturned by the JMOL. (AA 202, 221-23.) Arriva also noted that, in case AlphaMed 9 sought to amend its proof of claim to reallege the underlying causes of action from the 10 Florida action, the JMOL was a final judgment entitled to res judicata effect. (AA 202, 22311 26.) In its Objection, Arriva also alternatively moved to have AlphaMed's claim estimated 12 at zero under Bankruptcy Code Section 502(c) for the purposes of calculating the number 13 and weight of votes that AlphaMed would be allotted on Arriva's plan of reorganization. 14 (AA 207, 231-32.) 15 A hearing was held on AlphaMed's Claim on December 13, 2007. At the conclusion

16 of the hearing, Judge Jellen disallowed AlphaMed's Claim and alternatively estimated it at 17 zero. (AA 518, l.14-19; 521, l.7-11.) At the same hearing, Judge Jellen also granted 18 AlphaMed relief from the automatic stay to pursue its appeal of the JMOL in front of the 19 Eleventh Circuit. (AA 512, 1.8-24.) Thus, in disallowing the Claim, Judge Jellen noted that 20 "this ruling is subject to being revisited in the event that the Florida District Court ends up 21 finding that AlphaMed does have a valid claim against the debtor." (AA 518, l.17-19.) 22 The order of the Bankruptcy Court disallowing AlphaMed's Claim without leave to

23 amend and alternatively estimating it zero for voting purposes was entered on December 27, 24 2007. (AA 431-32.) In said Disallowance Order, the Bankruptcy Court specifically 25 provided that: "This order does not preclude reconsideration under Bankruptcy Code 26 Section 502(j) or otherwise based on further developments in the pending Florida litigation." 27 (AA 432.) 28
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On January 16, 2008, a hearing was held in the Bankruptcy Court on the confirmation

2 of Arriva's Fourth Amended Chapter 11 Plan of Reorganization, Dated December 12, 2007 3 (the "Plan"). (SPA 118-19, docket #331.) AlphaMed had previously filed an objection to 4 the confirmation of Arriva's Plan. (SPA 114, docket #307.) AlphaMed's counsel was 5 present and heard at each of the January 16 hearing and at the related January 18, 2008 6 hearing that dealt with the Bankruptcy Court's findings of fact and conclusions of law in 7 support of confirmation of the Plan. (SPA 118-19, docket #331; SPA 119-21, docket #335.) 8 At the conclusion of the January 16 Plan confirmation hearing, the Bankruptcy Court ruled 9 that Arriva's Plan would be confirmed, but that according to Section 7.2 of the Plan, 10 distribution of almost all of the funds in the pool to be distributed to the unsecured creditors 11 would be stayed pending the resolution of AlphaMed's appeal in the Eleventh Circuit. 12 (SPA 133:9-12; 154-55: § 7.2.) In this way, if AlphaMed prevails on appeal in the Eleventh 13 Circuit, its Claim may be reconsidered as set forth in the Disallowance Order, and it may 14 share in the proceeds in the unsecured claims pool with Arriva's other unsecured creditors. 15 On January 30, 2008, after negotiations between AlphaMed's and Arriva's counsel regarding 16 the form of the confirmation order (SPA 122, docket #343, 344), the Bankruptcy Court 17 entered its Order confirming Arriva's Plan. (SPA 123, docket #347.) 18 F. 19 This Appeal. On January 4, 2008, AlphaMed field a notice of appeal of the Disallowance Order.

20 (AA 443-44.) The Lezdeys also initiated four related appeals. This Court dismissed as moot 21 the first of these, 08-1279-SI, on May 27, 2008. This Court has ordered briefing on the 22 remaining appeals, 08-00692-SI, 08-00693-SI 08-00825-SI, contemporaneous with the 23 instant appeal. 24 25 IV. SUMMARY OF THE ARGUMENT This Court should affirm the Bankruptcy Court's disallowance of AlphaMed's Claim

26 for two reasons: (1) the Bankruptcy Court and Bankruptcy Code have provided for 27 AlphaMed's appellate rights, such that holding litigation on AlphaMed's Claim in abeyance 28 pending resolution of the Eleventh Circuit appeal, which would be extremely harmful to
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1 Arriva and the other creditors, is not necessary or advisable; and (2) the JMOL issued by the 2 Florida District Court overturned the jury's findings, as shown by (i) the basic nature of a 3 JMOL, (ii) the specific rulings of the Florida District Court, and (iii) AlphaMed's failure to 4 cite any case law in support of its position that the jury findings remain intact and have 5 preclusive effect in other courts. 6 7 A. 8 9 V. ARGUMENT The Bankruptcy Court Did Not Err by Disallowing AlphaMed's Claim Rather than Holding Adjudication of It in Abeyance Pending the Resolution of the Eleventh Circuit Appeal. AlphaMed argues that "the [Bankruptcy] Court's decision to disallow AlphaMed's

10 claim was premature and infringes on AlphaMed's right to appeal the [JMOL]" and that "the 11 Bankruptcy Court should have refrained from considering the claim until a decision from the 12 Eleventh Circuit." (Opening Brief, 9:1-4.) AlphaMed then argues in a footnote that 13 "Delaying the adjudication of AlphaMed's proof of claim pending a decision from the 14 Eleventh Circuit would not have impacted confirmation of the plan of reorganization." 15 (Opening Brief, 9:4, n.3.) Thus, AlphaMed essentially makes two arguments when alleging 16 that the Bankruptcy Court erred by failing to hold the adjudication of its Claim in abeyance: 17 (1) the Bankruptcy Court did not provide for its appeal rights in the Eleventh Circuit; and (2) 18 the Plan confirmation process would not have been impacted by the delay that would have 19 arisen were the Bankruptcy Court to have waited until the Eleventh Circuit appeal was 20 confirmed to adjudicate the Claim. AlphaMed cited no statutory or case law in support of 21 these arguments, nor did it even explain the reasoning behind these arguments, which 22 together take up about one half of a page of its Opening Brief. (Opening Brief, 8:16 ­ 9:4.) 23 1. 24 25 The Bankruptcy Court and the Bankruptcy Code Provided for AlphaMed's Appeal Rights.

Addressing the first argument, contrary to AlphaMed's contention, its appeal rights

26 were expressly preserved and provided for both by the orders of the Bankruptcy Court and 27 by a provision of the Bankruptcy Code. The Bankruptcy Court specifically provided for the 28 revisitation of AlphaMed's Claim in the event that AlphaMed prevails on appeal in the
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1 Eleventh Circuit. (AA 518.) Further, the Bankruptcy Court granted AlphaMed's Motion for 2 Relief from Stay (which AlphaMed did not file for over two and a half months after Arriva's 3 bankruptcy filing) so that AlphaMed could pursue the Eleventh Circuit appeal. (AA 512:84 24.) Finally, the Bankruptcy Court by confirming the Plan also stayed the distribution of the 5 large majority of the unsecured claims pool such that, if AlphaMed prevails on appeal, it 6 may take its pro rata share of said pool with the other unsecured creditors. (SPA 133:9-12; 7 154-55: § 7.2.) The Bankruptcy Court's actions thus evidence a consistent and prudent 8 concern for AlphaMed's ability to continue its appeal in the Eleventh Circuit. 9 Further, there is a specific provision of the Bankruptcy Code that protects

10 AlphaMed's ability to appeal in the Eleventh Circuit. Bankruptcy Code Section 502(j) 11 provides in pertinent part that: 12 13 14 "A claim that has been allowed or disallowed may be reconsidered for cause. A reconsidered claim may be allowed or disallowed according to the equities of the case." That the Bankruptcy Court cited this provision of the Code in its Disallowance Order

15 is no accident, as Section 502(j) mirrors the specific language of the Disallowance Order 16 providing that that the claim may be reconsidered depending on the outcome of the Eleventh 17 Circuit appeal, but that in the meantime the Claim should be estimated at zero so that the 18 plan confirmation process may go forward. See e.g., In re Spring Garden Foliage, Inc., 17 19 B.R. 882, 885 (Bankr. M.D. Fla. 1982) ("§ 502(j) indeed permits the reconsideration of an 20 allowed claim, but only for the purpose of determination of the creditor's right whose claim 21 is subject to reconsideration to share in the distribution and not for the purpose of voting 22 after the plan has been confirmed."); and In re Federated Department Stores, 144 B.R. 989, 23 992 (Bankr. S.D. Ohio 1992) (same). Thus, the Bankruptcy Court's orders and § 502(j) 24 create a scheme for protecting AlphaMed's appellate rights in the context of Arriva's 25 bankruptcy. Rather than being "infringed" as AlphaMed contends (Opening Brief 9:1-2), 26 AlphaMed's Eleventh Circuit appeal rights were specifically protected by the orders of the 27 Bankruptcy Court and by Section 502(j) of the Bankruptcy Code. If AlphaMed wins its 28 Eleventh Circuit appeal, and if its Claim is ultimately allowed in a set amount, then its claim
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1 will be reconsidered pursuant to the Disallowance Order and Section 502(j). In that case, 2 AlpahMed's Claim may be allowed and it will share in the distribution of the unsecured 3 claims pool. This is the way bankruptcy is supposed to work and this is the way it did work 4 in this case. 5 2. 6 7 The Plan Confirmation Would Have Been Severely Affected by AlphaMed's Suggested Delay. AlphaMed's second argument ­ that delaying the adjudication of AlphaMed's Claim

8 until the Eleventh Circuit appeal "would not have impacted confirmation of the plan of 9 reorganization" ­ is simply incorrect. In order for the plan confirmation process to go 10 forward, the Bankruptcy Court needed to address the number and weight of votes on 11 Arriva's Plan that would be allotted to AlphaMed. Bankruptcy Code Section 1129(a)(8) 12 requires that for confirmation, each class of impaired claims has accepted the plan of 13 reorganization. Under Bankruptcy Code Section 1126(c), a class of claims is deemed to 14 have accepted a plan of reorganization if more than two-thirds in amount and more than one15 half in number have voted in favor of the plan. In order to make those calculations, the 16 Bankruptcy Court needed to know the total number of votes and the total dollar amount of 17 allowed claims, which required the Bankruptcy Court to decide on the objections to claims 18 made in Arriva's Objection. This is especially so in the case of the objection to AlphaMed's 19 Claim, since AlphaMed's Claim was very large in dollar amount. 20 In order to decide on the proper number and weight of votes to apportion to an entity

21 that has filed a claim which has been disputed, a Bankruptcy Court has two options: either 22 disallow the claim under Bankruptcy Code Section 502(b) or estimate it under Bankruptcy 23 Code Section 502(c). In AlphaMed's case, the Bankruptcy Court did both, finding 24 AlphaMed to have no vote under either measure. 25 A delay in the adjudication of the Objection to AlphaMed's Claim would clearly then

26 have delayed the confirmation of the Plan and operated to injure the interests of Arriva and 27 the other creditors holding allowed unsecured claims. Timing is always of the essence in 28 Chapter 11 bankruptcy cases, where distresses businesses continue to operate in anticipation
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1 of receiving the discharge they need to regain health. See., e.g., United Sav. Ass'n v. 2 Timbers of Inwood Forest Assocs., 484 U.S. 365, 376 (U.S. 1988) (noting that in the context 3 of a debtor's opposition to a relief from stay motion, the debtor bears the burden of showing 4 that it has "a reasonable possibility of a successful reorganization within a reasonable time"); 5 In re Hill, 811 F.2d 484, 487 (9th Cir. 1987) (time limitations in the Bankruptcy Rules serve 6 the "interest of prompt administration of bankruptcy cases"); In re Harrison, 71 B.R. 457, 7 459 (Bankr. D. Minn. 1987) (time limitations serve the "fresh start" goals of bankruptcy in 8 that they provide that "a petitioning debtor will enjoy finality and certainty in relief from 9 financial distress as quickly as possible.") 10 In Arriva's case, timing was especially important. Arriva's portfolio of

11 pharmaceutical products are yet in various stages of obtaining FDA approval, such that 12 Arriva is not a company that operates on revenue, but rather one that operates on investment. 13 Arriva was able to secure debtor-in-possession ("DIP") financing to continue operating in 14 bankruptcy, but it only received enough such funding to operate through January, 2008. 15 (SPA 249.) Further, Arriva also needed to complete its reorganization by the end of 16 January, 2008, in order to avoid defaulting on its obligations to its DIP lenders and so realize 17 upon their obligation to provide "exit financing" to Arriva to continue operation upon its 18 emergence from bankruptcy. (SPA 249; 255:3-23.) Thus, if Arriva did not confirm a Plan 19 by the end of January, it would likely have had to convert to a Chapter 7 and liquidate. This 20 would not only have injured Arriva, but Arriva's creditors as well, all of whom stood to gain 21 more out of a reorganization under Chapter 11 of the Bankruptcy Code than out of a 22 liquidation under Chapter 7. (SPA 251-52.) 23 Waiting for the Eleventh Circuit appeal to conclude was simply not an option ­ it has

24 been over seven months since relief from stay was granted and there still has not been a 25 decision ­ nor is it required under the Bankruptcy Code. In fact, as explained above with 26 respect to Bankruptcy Code 502(b), (c) and (j), the Code specifically provides for 27 mechanisms to allow the plan confirmation process to continue while such an appeal is 28 pending. Requiring parties to wait for all appeals related to disputed claims to be exhausted
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1 would be to needlessly injure the interests of the debtor and the general pool of creditors in 2 order to provide a benefit to a single creditor, thus defeating the purposes of the Bankruptcy 3 Code, and especially Chapter 11 thereof. NLRB v. Bildisco & Bildisco, 465 U.S. 513, 527 4 (1984) (''the policy of Chapter 11 is to permit successful rehabilitation of debtors''); In re 5 Hamada, 291 F.3d 645, 649 (9th Cir. 2002) (citing the "strict time limitations" provided by 6 the Bankruptcy Code as integral to the achievement of the "Bankruptcy Code's goal of 7 providing debtors with a fresh start"); In re Timbers of Inwood Forest Assocs., Ltd., 808 F.2d 8 363, 373-74 (5th Cir. 1987) (en banc), aff'd, 484 U.S. 365 (U.S. 1988) (stating that a 9 bankruptcy judge must vigilantly manage Chapter 11 cases and "promote their orderly and 10 prompt disposition" in order to effectuate the Code's twin purposes of "reorganizability" on 11 the one hand and protection of the pool of creditors on the other); H. Rep. No. 595, 95th 12 Cong. 1st Sess. 220 (1977) ("The purpose of a business reorganization case, unlike a 13 liquidation case, is to restructure a business's finances so that it may continue to operate, 14 provide its employees with jobs, pay its creditors, and produce a return for its 15 stockholders.") 16 Contrary to AlphaMed's contentions, its Claim was dealt with fairly and equitably

17 under procedures in the Bankruptcy Code created for just such a situation. The Bankruptcy 18 Court did not err by disallowing AlphaMed's Claim instead of holding it in abeyance 19 pending the resolution of the Eleventh Circuit appeal. Rather, the Bankruptcy Court merely 20 did as the Bankruptcy Code and the equities of Arriva's bankruptcy case required. 21 B. 22 23 The Bankruptcy Court Did Not Err by Holding that the Florida Jury's Liability Findings Were Overturned. In its briefing in the Bankruptcy Court, AlphaMed attempted to argue that the jury

24 findings from the Florida litigation were not disturbed by the JMOL and so could serve as a 25 valid basis for a claim in bankruptcy. When this argument was made orally in front of the 26 presiding bankruptcy judge, Hon. Edward D. Jellen, Judge Jellen responded: "I can't think 27 of a more disturbing of findings [sic] than to say the judgment is invalid. Just ­ he [sic] -1428 threw it out... Now, you can go and cross-examine the judge on why he threw them out, but
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1 ... I don't think there's any findings that are extant in that case. There's nothing but the 2 judgment against your client." (AA 488:24-489:7.) 3 In its Opening Brief, AlphaMed again argues that the jury findings have remained

4 intact, contending that the Bankruptcy Court was in error when it found such findings to 5 have been overturned. (Opening Brief, 9:5-15:6.) AlphaMed's position is incorrect. The 6 Bankruptcy Court's ruling was not error for three reasons: (1) the fundamental purpose and 7 nature of a JMOL is to overturn the underlying jury verdict; (2) though not necessary to 8 implement to the vacating effect of the JMOL, the Florida District Court also clearly stated 9 that the jury verdict was being vacated in its entirety; and (3) AlphaMed's strained reading of 10 case law is incorrect and inapposite. 11 1. 12 13 AlphaMed Misconstrues the Basic Effect of a JMOL, which is to Completely Overturn a Jury Verdict.

A renewed motion for judgment as a matter of law after the entry of a jury verdict is

14 made pursuant to Fed. R. Civ. P. 50(b), and is governed by the same standard as the original 15 motion for a judgment as a matter of law under Fed. R. Civ. P. 50(a), which is that "a 16 reasonable jury would not have a legally sufficient evidentiary basis to find for the party." 17 Fed. R. Civ. P. 50(a). In other words, a judgment as a matter of law is issued when there is 18 "no legally sufficient evidentiary basis for a reasonable jury to find for [the plaintiff] on a 19 material element of his cause of action." Christopher v. Florida, 449 F.3d 1360 (11th Cir. 20 2006); see also, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-51 (1981) (discussing 21 the standards for summary judgment and judgment notwithstanding the verdict); and Forrett 22 v. Richardson, 112 F.3d 416, 419 (9th Cir. 1997) (noting that JMOL means that the 23 "evidence, construed in the light most favorable to [AlphaMed], permits only one reasonable 24 conclusion, and that conclusion is contrary to that of the jury"). Even the cases cited in 25 AlphaMed's Opening Brief state as much. See, e.g., Pordy v. Land O'Lakes, Inc., 97 Fed. 26 Appx. 921, 926 (Fed. Cir. 2004) ("To prevail on a motion for JMOL following a jury trial, 27 the moving party must show that the jury's findings, presumed or expressed, are not 28 supported by substantial evidence.") (internal quotations omitted).
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1

A JMOL is thus a determination that the jury verdict reflected a legal impossibility--

2 that reasonable minds could not differ about the conclusion. Indeed, the specific purpose for 3 the existence of the JMOL is to overturn jury verdicts. Fed. R. Civ. P. 50; Jorgensen v. 4 Cassiday, 320 F.3d 906 (9th Cir. 2003) (discussing when a "district court can overturn a 5 jury's verdict and grant a Rule 50(a) motion"); 9 Moore's Federal Practice and Procedure 6 § 50.02 (3d ed. rev. 2007). 7 Of note, AlphaMed suggests in various places in its Opening Brief that the fact that

8 the Florida District Court's decision has been appealed somehow indicates that the JMOL is 9 invalid and the jury verdict remains intact. (See, e.g., Opening Brief, 10:19.) This is plainly 10 not the case. An appeal of a judgment, such as the JMOL, does not rob it of its final and 11 preclusive effect until it is overturned. Tripati v. Henman, 857 F.2d 1366, 1367 (9th Cir. 12 1988), citing 18 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 4433, 13 at 308 (1981); see also Restatement (Second) of Judgments § 13 (1982) ([a] "judgment

14 otherwise final remains so despite the taking of an appeal"). AlphaMed cites no authority to 15 the contrary. 16 2. 17 18 In Addition, the Florida District Court's Opinion Granting the JMOL Expressly Provided for the Vacatur of the Entirety of the Jury Verdict.

In its Opening Brief, AlphaMed not only misunderstands the basic nature of a JMOL,

19 but also brazenly misrepresents the specific decrees of the Florida District Court on this 20 issue. Contrary to AlphaMed's contention that the Florida District Court "did not nullify or 21 set aside the jury's findings as to liability" (Opening Brief 9:12), the Florida District Court 22 specifically set out the manner in which AlphaMed's failure to prove any damages 23 whatsoever was a failure to prove an essential element of each cause of action. Though not 24 necessary to the total upending effect of a JMOL, the Florida District Court explained that 25 such a failure to prove an element of each claim entitled Arriva to the JMOL which vacated 26 the jury verdict in its entirety. This could not have been clearer than when, in summarizing 27 its verdict, the Florida District Court stated, "AlphaMed's failure to link Defendants' conduct 28 to any damage that it may have suffered is fatal to each of its claims and compels the Court
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1 to vacate the jury's verdict in its entirety." AlphaMed Pharmaceuticals Corp. v. Arriva 2 Pharmaceuticals, Inc., 432 F.Supp.2d 1319, 1334 (S.D. Fla. 2006) (emphasis added). 3 The Florida District Court then further explained this total upending of the jury

4 verdict as to each claim for relief, reasoning that as damages were an element of each cause 5 of action, the jury verdict must be vacated in its entirety. In its Fourth Amended Complaint, 6 AlphaMed had presented three claims: (1) misappropriation of trade secrets; (2) tortious 7 interference with an advantageous business relationship; and (3) common law unfair 8 competition. AlphaMed, 432 F.Supp.2d at 1329. As to the misappropriation of trade secrets 9 claim, the Florida District Court agreed with the defendants' position that "AlphaMed cannot 10 recover under the Uniform Trade Secrets Act ("UTSA") because it did not present any 11 evidence of damages as required by Fla. Stat. § 688.004." Id. at 1334. As to the tortious 12 interference claim, the Florida District Court held that "Because AlphaMed was unable to 13 prove its entitlement to lost profit damages, the only measure of damages sought, 14 AlphaMed's claim for tortious interference fails as a matter of law." 432 F.Supp.2d at 1352. 15 Not coincidentally, this section of the Florida District Court's opinion is entitled 16 "AlphaMed's Failure to Prove Damages Requires the Court to Vacate the Jury's Finding of 17 Liability on the Claim for Tortious Interference." Id. Finally, as to the unfair competition 18 claim, the Florida District Court held that "While many of the jury's findings are insufficient 19 to support the verdict on the unfair competition count as a matter of law, a through analysis 20 of each finding is unnecessary. The verdict on AlphaMed's unfair competition claim must 21 be vacated because of AlphaMed's failure to prove damages." Id. at 1353. As with the 22 tortious interference section, this section of the opinion is tellingly entitled "AlphaMed's 23 Failure to Prove Damages Requires the Court to Vacate the Jury's Finding of Liability on the 24 Claim for Unfair Competition." Id. Thus, in contrast to AlphaMed's contention that the 25 JMOL was unrelated to the case-in-chief, the Florida District Court took pains to explain the 26 manner in which AlphaMed's failure to prove the elements of each of its causes of action 27 required the Court to issue the JMOL. Such a ruling could not have been a surprise to 28 AlphaMed, since the requirement that a motion for JMOL be brought at the close of
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1 evidence in order to be renewed post-trial under FRCP 50(b) is meant to give the non2 movant a chance to correct evidentiary deficiencies. Ross v. Rhodes Furniture, 146 F.3d 3 1286, 1289 (11th Cir. 1998); Waters v. Young, 100 F.3d 1437, 1441 (9th Cir. 1996). The 4 Florida District Court's grant of JMOL after trial reflects the Court's decision that AlphaMed 5 was apprised of such deficiencies and failed to correct them. 6 On top of the complete vacatur of the jury verdict accomplished by the JMOL, the

7 Florida District Court also granted Arriva's conditional motion for a new trial, which the 8 court explained "does not affect the finality of the judgment in Arriva's favor." 432 9 F.Supp.2d at 1356, n.54. In so ruling, the Florida District Court gave further evidence that it 10 intended to completely overturn the jury verdict. The court's reasons for granting the 11 conditional new trial motion were twofold: "the jury verdict was against the great weight of 12 the evidence" and "the jury failed to follow instructions." Id. at 1355-1356. As to the 13 former, the Florida District Court explained that the jury verdict was against the great weight 14 of the evidence "[f]or the reasons set forth above", which is a reference to the failure to 15 prove the damage element of each claim. Id. at 1355. As to the latter, the Florida District 16 Court noted that the jury's failure to follow instructions was "inappropriately invited" by 17 AlphaMed's closing argument. Id. at 1356, n.55. Finally, concluding the opinion, the 18 Florida District Court stated that "For all of the reasons addressed above, the Court cannot 19 allow the jury's verdict in this case to stand." Id. at 1358. 20 Thus, in addition to misunderstanding the basic nature of a JMOL, AlphaMed also

21 misconstrues the Florida District Court's opinion granting the JMOL. The Bankruptcy 22 Court's ruling was not in error ­ it was as correct then as it is now. 23 24 3. AlphaMed's Strained Reading of Case Law is Incorrect and Inapt.

AlphaMed cites several cases in its Opening Brief in an attempt to fashion an

25 argument that the Florida jury verdict's findings are still valid and of preclusive effect 26 despite the fact that the Florida District Court (i) issued a JMOL overturning the verdict as a 27 legal impossibility, and (ii) stated the verdict to be "against the great weight of the 28 evidence." AlphaMed's attempt failed.
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1

AlphaMed's first case-law based argument is that its "failure to quantify damages did

2 not affect the jury's determination of liability." This argument is mistaken as a factual matter 3 since as noted above, the Florida District Court held that AlphaMed's failure to prove any 4 damages whatsoever was a failure to prove a necessary element of each of the underlying 5 causes of action. It is a basic tenet of hornbook law that failure to prove an element of a 6 claim necessitates a finding of no liability. See, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 7 323 (1986) (comparing the standards under FRCP 56 and FRCP 50 for judgment upon 8 failing to prove an element of a claim). In any case, the case law citation provided by 9 AlphaMed to support its argument is off base. AlphaMed cites to Firestone Tire and Rubber 10 Co. v. Pearson, 769 F.2d 1471, 1480 (10th Cir. 1985)5, a case in which a JMOL was never 11 issued, but rather the denial of a JMOL was appealed. Id. at 1473. Thus, Firestone is not a 12 case about the effect of a JMOL on a jury verdict. Further, in Firestone, the plaintiff did 13 prove damages, the question rather concerned the correct amount of damages, for which a 14 new trial was ordered instead of a JMOL. Id. at 1480. AlphaMed, on the other hand, failed 15 to prove damages at all and so failed to prove an element of each of the causes of action. If 16 AlphaMed is contending that failure to prove damages should not have merited the JMOL, 17 but rather a new trial as in Firestone, then it is in the wrong court to make that argument. 18 AlphaMed next argues that a JMOL does not "take away the jury's findings."

19 (Opening Brief, 11:24-27.) For this proposition, AlphaMed first provides a quote from 20 Berry v. United States, 312 U.S. 450 (1941) about Rule 50(b) not taking away the power of 21 juries to weigh and consider facts. However, AlphaMed fails to note that in Berry, the Court 22 found that the evidence was sufficient to support the jury verdict. Berry, 312 U.S. at 456. 23 Thus, Berry is not an example of a situation in which a jury's findings remained intact after a 24 Of note, AlphaMed argues that the Ninth Circuit has "adopted" Firestone in Air-Sea Forwarders, Inv. v. Air Asia Co., LTD, 880 F.2d 176, 190 n.15 (9th Cir. 1989). (Opening 26 Brief, 10: n.4.) However, the Air-Sea Forwarders case only cites Firestone for the proposition that "appellate court may order new trial where directed verdict found to be 27 inappropriate." Air-Sea Forwarders, 880 F.2d at 190, n.15. Like Firestone itself, Air-Sea Forwarders has nothing to do with the effect of a JMOL on a jury verdict. 28 25
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1 JMOL. Rather, Berry is simply a case, unlike the Florida District Court decision in 2 AlphaMed v. Arriva, where the JMOL standard was not met. The quoted language is simply 3 part of the Court's explanation of the JMOL standard. AlphaMed then analogizes to the case 4 of Barber v. Whirlpool Corp., 34 F.3d 1268 (4th Cir. 1994), citing it as evidence that courts 5 refuse "to disturb a jury verdict" when a JMOL is issued only on some of the claims. 6 (Opening Brief, 12:3 ­ 6.) In Barber, the denial of a JMOL was appealed as to a jury verdict 7 in favor of plaintiff on two claims. On appeal, the court granted JMOL as to one of the two 8 claims. 34 F.3d at 1276. The jury's verdict had not apportioned damages between the two 9 claims but rather had just provided for one damage award covering both claims. 10 Consequently, the court ordered a new trial on damages for the claim that was not 11 overturned by the JMOL. Id. at 1278. Nowhere in Barber does the court say that the 12 findings of the jury regarding the claim that was overturned by the JMOL are somehow 13 preserved. In addition, AlphaMed fails to recognize that unlike in Barber, the JMOL in the 14 Florida litigation here was issued as to all claims. 15 Lastly, AlphaMed attempts to argue that "a vacated jury verdict can still be binding as

16 to the jury's findings concerning the issues tried, unless the jury's findings of fact themselves 17 have been impugned." (Opening Brief, 12:21-23.) AlphaMed cites several cases for this 18 proposition. First, it cites Pordy v. Land O'Lakes, Inc., 97 Fed. Appx 921, 930 (Fed. Cir. 19 2004). Pordy though is not on point because it is a case in which the court is considering an 20 appeal of a JMOL that was issued in favor of the defendant in the case. Id. at 923. In 21 reversing the JMOL, the court ordered a new trial on a different defense of defendant's, 22 stating that if defendant did not prevail on said affirmative defense, then the jury verdict 23 would be reinstated. Id. at 930. In other words, it was not a case where a court considered 24 the effect of a jury verdict while a JMOL was still in place. Similarly, in Lifewise Master 25 Funding v. Telebank, 374 F.3d 917 (10th Cir. 2004), a JMOL was issued in favor of the 26 defendant lender on the ground that plaintiff borrower had failed to meet a precondition to 27 receiving funding. Id. at 921-22. The ruling on the precondition was overturned on appeal, 28 leading the court to reach a new issue of reliance damages. Id. at 933. In considering this
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1 issue, the court relied on the jury findings which had been overturned by the lower court's 2 ruling on the precondition to funding. Id. at 933-34. Thus in Lifewise, since the appellate 3 court overturned the basis of the JMOL, this was again not a case in which a court 4 considered the effect of a jury verdict in light of an existing JMOL. 5 AlphaMed's citation to Artis v. Hitachi Zosen Clearing, Inc., 967 F.2d 1132 also does

6 not support its argument. Artis is a case in which a court considers the relationship between 7 jury findings in an employment case brought under 42 U.S.C. § 1981 and the same case 8 brought simultaneously under Title VII of the Civil Rights Act of 1964. In Artis, the lower 9 court vacated the jury verdict because it decided that the case should not have gone to the 10 jury. Id. at 1135. The opinion does not say that it was a JMOL under Rule 50. Then, in 11 deciding the same action in a bench trial under Title VII, the lower court appeared to rely 12 upon the vacated jury verdict. Id. The appellate court held that this was not error. Id. at 13 1138. In so holding, the court contrasted to another case in which a vacated jury verdict 14 could not be relied upon because in that case, "the court concluded that at least part of the 15 jury's verdict was not supported by the evidence." Id. Of course, the JMOL issued by the 16 Florida District Court was just such a case where the court "concluded that at least part of 17 the jury's verdict was not supported by the evidence" and so could not be relied upon. 18 As noted in subsection 1 above, a JMOL is issued when "a reasonable jury would not

19 have a legally sufficient evidentiary basis to find for the party." Fed. R. Civ. P. 50. 20 Consequently, even if AlphaMed is correct that a jury's findings could remain valid if not 21 "impugned", the nature of a JMOL is to "impugn" jury findings. In addition, as noted in 22 subsection 2 above, the Florida District Court specifically impugned the jury findings, 23 holding them to be "against the great weight of the evidence." 24 AlphaMed takes its "impugned" argument one final step further in the wrong

25 direction when it argues that such non-impugned jury verdicts also have preclusive effect. 26 (Opening Brief, 13:7-9.) This is plainly wrong, since the basic test for issue preclusion 27 requires the judgment to be final, Cook v. State, 921 So.2d 631, 634 (Fla.Ct.App. 2005), and 28 a jury verdict overturned by a JMOL is far from final under any measure. Further, the cases
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APPELLEE'S BRIEF ALPHAMED CLAIM APPEAL

Case 3:08-cv-00691-SI

Document 17

Filed 06/25/2008

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1 cited in support of AlphaMed's position, Sentinel Trust Co. v. Universal Bonding Ins. Co., 2 316 F.3d 213 (3d Cir. 2003) and Harris Trust & Sav. Bank v. John Hancock Mut. Life Ins., 3 970 F.2d 1138 (2d Cir. 1992) are both cases dealing the preclusive effect of a judgment 4 vacated as part of a settlement, not one overturned by a JMOL. Sentinel, 316 F.3d. at 216; 5 Harris Trust, 970 F.2d at 1146. 6 For the reasons stated above, none of the list of cases cited by AlphaMed support the 7 proposition for which they are cited ­ that the findings of a jury verdict survive a JMOL and 8 have preclusive effect in other courts. This is so because it is not the case: a JMOL 9 general