Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—DMass: Preliminary Injunction Denied in Case Between Related Companies , (Mar 25, 2013)

By Jody Coultas, J.D.

A company president was not entitled to an injunction against a company in which she had an interest in because there was no possibility of irreparable harm, according to the federal district court in Boston (Asymmetrx Medical, Inc. v. McKeon, March 21, 2013, Gorton, N.). The president also stated a Connecticut Unfair Trade Practices Act (UTPA) claim.

Maria McKeon and her three siblings all participated in the affairs of AsymmetRx, Inc. (AI), an entity established to commercialize two drugs, including a drug developed by Dr. Frank McKeon. Ms. McKeon incorporated AI and was listed in the corporate documents as its sole incorporator, director and officer. The relationship between Ms. McKeon and Dr. McKeon soured, culminating with Ms. McKeon’s withdrawal from participation in the day-to-day affairs of AI.

Ms. McKeon and her siblings, purportedly acting as AI’s remaining shareholders, agreed that AI would be reconstituted as Asymmetrx Medical, Inc. (AMI) No steps were taken to dissolve AI, which continues to exist as a separate corporation and as the entity holding patent rights to a drug developed by Dr. McKeon. AI sub-licensed the right to commercialize that drug to a drug company.

Ms. McKeon moved for a preliminary injunction enjoining Dr. McKeon, Mr. McKeon and AMI from interfering with AI’s contractual and business relationships, diverting AI’s business and income to themselves and breaching their fiduciary duties to AI and Ms. McKeon in violation of the UTPA. The court concluded that Ms. MeKeon would not suffer irreparable harm absent a preliminary injunction. Ms. McKeon argued that AI’s ongoing business relationships will be irreparably harmed if Dr. and Mr. McKeon amend a previous license agreement, she offered no evidence of any plans or preparations for them to do so. Even if the license agreement was amended, Ms. McKeon would not be harmed. Because AMI is the successor to AI in an ongoing business relationship, neither Ms. McKeon nor AI will sustain irreparable injury because she will be entitled to her equivalent share in any proceeds received by AMI that should have been paid to AI.

Ms. McKeon stated a UTPA claim against AMI and her family members, according to the court. AMI argued that the UTPA claim should be dismissed because the case involved an intra-corporate dispute to which the UTPA does not apply and the statute of limitations had run. The court found a UTPA violation may be found here because Dr. and Mr. McKeon allegedly interfered with AI’s contractual relationships and misappropriating AI’s income to finance the competing interests of AMI. The allegations concerning the misappropriation of five checks payable to AI and the alleged ongoing interference of the defendants with AI’s contractual relationships occurred, if at all, within the three years statute of limitations.

The case is No. 11-11079-NMG.

Attorneys: Nieve Anjomi (Rodman Law Group LLC) for Asymmetrx Medical, Inc.David R. Schaefer (Brenner, Saltzman & Wallman LLP) for Maria McKeon.

Companies: Asymmetrx Medical, Inc.; AsymmetRx, Inc.

Cases: StateUnfairTradePractices MassachusettsNews