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Medpointe Healthcare, Inc. v. Kozachuk

March 3, 2009


The opinion of the court was delivered by: Bongiovanni, Magistrate Judge


This matter comes before the Court upon the Motion of Plaintiff MedPointe Healthcare, Inc. ("MedPointe") for an Order enforcing settlement against Defendant Dr. Walter E. Kozachuk ("Dr. Kozachuk"). The Court held a hearing on this Motion on January 29, 2009 and has fully considered the parties' arguments as set forth at that hearing and in their papers. For the reasons set forth below, the Court recommends that MedPointe's Motion be granted.

I. Background

Dr. Kozachuk is the record owner of all rights, title and interest in the following three patents, all of which relate to the medical use of felbamate: U.S. Patent No. 5,728,728 (the "'728 patent"), U.S. Patent No. 5,942,540 (the "'540 patent") and U.S. Patent No. 6,515,019 (the "'019 patent"). On April 28, 2004, MedPointe initiated this case against Dr. Kozachuk claiming that Dr. Kozachuk is not the true inventor or at least not the sole inventor of the '728, '540 and '019 patents. (See generally, Pl. Compl. and Amended Compl.) Dr. Kozachuk denied MedPointe's allegations and this litigation proceeded. (See generally Def. Answer). A trial date was set in this matter for May 19, 2008.

Prior to the start of trial, on May 14, 2008, the undersigned conducted a settlement conference with counsel and both parties in this matter. The settlement conference lasted approximately four hours. At the end of the conference, the parties had agreed to settle the matter. In order to memorialize the settlement reached by MedPointe and Dr. Kozachuk, the Court had counsel and the parties place the terms of their settlement on the record. (See generally, May 14, 2008 Settlement Tr.) Given the settlement reached in this matter, on May 15, 2008, the Court dismissed MedPointe's Complaint and gave the parties sixty days to reduce their settlement agreement to writing and, if desired, to file an additional stipulation of dismissal with the Court. (See Hon. Mary L. Cooper's 5/15/08 Order).

On June 16, 2008, counsel for MedPointe provided counsel for Dr. Kozachuk with a draft Settlement Agreement and Release and a draft Assignment (collectively, the "Settlement Documents"). (See October 29, 2008 Brown Aff. at ¶8). Because the Settlement Documents were not executed by July 14, 2008, the Court extended the previously entered 60-day Order until August 13, 2008. (Hon. Mary L. Cooper's 7/14/08 Order). The Court subsequently extended the parties' deadline for reducing their agreement to writing a second time on August 13, 2008, giving them until August 28, 2008 to consummate the written agreement. (Hon. Tonianne J. Bongiovanni's 8/13/08 Order).

Between August 7, 2008 and August 27, 2008 counsel for both parties' communicated in an effort to finalize the written settlement agreement and MedPointe sent revised Settlement Documents to Dr. Kozachuk's counsel. (See October 29, 2008 Brown Aff. at ¶¶ 10-13). However, on August 27, 2008, counsel for Dr. Kozachuk informed counsel for MedPointe that he was unable to obtain his client's signature on the revised Settlement Documents. (Id. at ¶13). Counsel for Dr. Kozachuk also indicated that he would be filing a motion to withdraw as counsel, which he did later that day. On September 3, 2008, the Court conducted a telephone conference regarding the status of the settlement of this matter. During the telephone conference, the Court extended the 60-day Order a third time until November 1, 2008 and instructed counsel for Dr. Kozachuk to inform Dr. Kozachuk that if he fails to execute the Settlement Documents and if the Court finds that in light of the settlement reached on May 14, 2008 his failure to do so is unwarranted, sanctions may be imposed against him. (Hon. Tonianne J. Bongiovanni's 9/4/08 Order). The Court also required Dr. Kozachuk to obtain a copy of the transcript of the May 14, 2008 settlement proceedings and to furnish a copy of that transcript to MedPointe. (Id.)

On October 29, 2008, having not received executed Settlement Documents from Dr. Kozachuk, MedPointe filed the instant Motion seeking to enforce settlement and for sanctions. Dr. Kozachuk opposes MedPointe's Motion. The parties' arguments are set forth in detail in their papers and were heard by this Court during the January 29, 2009 hearing. As a result, the Court shall not restate them at length herein.

To summarize, MedPointe seeks to enforce the settlement reached and placed on the record during the May 14, 2008 settlement conference. MedPointe argues that an enforceable agreement was reached on May 14, 2008 and the fact that the agreement was never reduced to writing is irrelevant. Specifically, MedPointe argues that the essential terms of the settlement, which follow, were agreed upon by the parties at the May 14, 2008 conference: (1) MedPointe will pay $60,000 to Dr. Kozachuk; (2) Dr. Kozachuk will transfer all right, title and interest in the three United States patents in suit, namely the '728, '540 and '019 patents, to MedPointe or its successor; (3) MedPointe will review Dr. Kozachuk's pending United States patent application regarding felbamate to determine whether in MedPointe's view all or part of the application triggers Dr. Kozachuk's obligations under his agreement with Carter Wallace. If MedPointe thinks that all or part of it does, counsel for MedPointe and Dr. Kozachuk will confer in an effort to reach an agreement on a proper course of action and if an agreement cannot be reached the parties will arbitrate the dispute to determine whether Dr. Kozachuk's patent application or patent, if issued, needs to be transferred to MedPointe's successor, understanding that the arbitration may only bear on part of Dr. Kozachuk's application; and (4) the settlement is without prejudice to MedPointe or its successor's rights with respect to any foreign patents or patent applications for foreign patents obtained by Dr. Kozachuk that relate to felbamate. MedPointe also argues that because Dr. Kozachuk has no basis for failing to sign the Settlement Documents as revised on August 12, 2008, Dr. Kozachuk should be sanctioned and MedPointe awarded the fees and costs it has occurred since August 12, 2008. In this regard, MedPointe suggests that the Court set off $9,842.78 from the $60,000 due to Dr. Kozachuk according to the settlement.

As previously stated, Dr. Kozachuk opposes MedPointe's Motion to enforce settlement. Dr. Kozachuk argues that he did not understand the May 14, 2008 proceedings and that he "had no conception that the 'offer' being discussed was accepted by him[.]" (Dr. Kozachuk's Br. at 1). Dr. Kozachuk claims that he had no idea that he was foregoing his right to try this matter. Dr. Kozachuk alleges that on May 3, 2008 he told his counsel to not even respond to an offer that was nearly identical to that put forward at the May 18, 2008 hearing (it called for a payment of $40,000 instead of $60,000). Dr. Kozachuk further argues that also relevant is the fact that after he informed his counsel not to counter MedPointe's settlement offer and to prepare to go to trial, on May 5, 2008, only nine days prior to the Court's settlement conference and fourteen days before the trial of this patent litigation was slated to begin, his attorney attempted to coerce him into settling this matter by threatening to withdraw as counsel.

In addition, Dr. Kozachuk claims that it is clear that he did not intend to settle this matter because a number of triable issues remained in the case. Further, he argues that his lack of intent to settle is evident by the fact that MedPointe's offer "constituted an unfathomable capitulation" given the fact that Dr. Kozachuk believed and continues to believe that he has "an excellent chance to prevail at trial." (Id. at 4-5). Dr. Kozachuk argues that it is "unthinkable that he understood that he was turning over his three patents to an employer of a decade ago for $60,000: no license, no royalty, indeed no compromise at all." (Id. at 27). Indeed, he states that it is plain that he did not understand the settlement or intend to settle because the alleged settlement would mean he had agreed "to walk away from his three multi-million-dollar patents for a mere $60,000.00 (far less than even the cost of obtaining the patents)." (Id. at 6). Moreover, the alleged settlement would mean he had agreed "to turn over four" patents when he had only been sued on three. (Id. at 27 (Emphasis in original). Dr. Kozachuk also argues that his actions following the purported settlement show that he never intended to settle this matter. Further, Dr. Kozachuk claims that the May 14, 2008 proceedings lacked any voir dire by the Court or his counsel to ensure that he understood the settlement to which he purportedly agreed.


A settlement agreement is a type of contract. See Mortellite v. Novartis Crop Prot., Inc., 460 F.3d 483, 492 (3d Cir. 2006) (citing Borough of Haledon v. Borough of N. Haledon, 358 N.J. Super. 289, 305 (App. Div. 2003)). Consequently, courts look to state contract law when determining whether an enforceable settlement agreement has been reached. See Id.

In New Jersey, there is a strong public policy favoring settlements. Nolan v. Lee Ho., 120 N.J. 465, 472 (1990). Consequently, courts "strain to give effect to the terms of a settlement wherever possible." Dep't of Pub. Advocate v. N.J. Bd. of Pub. Util., 206 N.J. Super. 523, 528 (App. Div. 1985). Nevertheless, courts will not enforce "[a] settlement . . . 'where there appears to have been an absence of mutuality of accord between the parties or their attorneys in some substantial particulars, or the stipulated agreement is incomplete in some of its material and essential terms.'" Bistricer v. Bistricer, 231 N.J. Super. 143, 147 (Ch. Div. 1987) (quoting Kupper v. Barger, 33 N.J. Super. 491, 494 (App. Div. 1955)). However, "a contract is no less a contract because some preferable clauses may be omitted either ...

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