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Halcyon Biomedical, Inc. v. Glatt Air Techniques, Inc

United States District Court, S.D. Texas, Houston Division

June 10, 2019

HALCYON BIOMEDICAL, INC., Plaintiff,
v.
GLATT AIR TECHNIQUES, INC., Defendant.

          MEMORANDUM AND OPINION

          Lee H. Rosenthal Chief United States District Judge

         Halcyon Biomedical Inc. has sued Glatt Air Techniques, Inc., asserting fraudulent inducement, negligent misrepresentation, contract breach, conversion, and violations of the Texas Deceptive Trade Practices Act. (Docket Entry No. 9 at 16-34). In September 2017, Halcyon contracted with Glatt to make dissolvable tablets for testing for sickle-cell disease. (Id. at 6-14). Halcyon alleges that Glatt made misrepresentations about the agreement, its ability to meet Halcyon's tablet requirements, and payment arrangements; breached the agreement; and failed to return Halcyon's “analytical column” or “mini-tab pressing tooling” after their relationship deteriorated. (Id.).

         Glatt moved to dismiss for lack of personal jurisdiction, improper venue, failure to state a plausible claim, and judgment on the pleadings. Halcyon filed an amended complaint and responded, arguing that the court has specific jurisdiction, venue is proper, and the amendment made the motions to dismiss for failure to state a plausible claim and for judgment on the pleadings moot. Glatt replied that the motions remain in need of decision, there is neither specific jurisdiction nor proper venue, and the amended complaint fails to allege sufficient facts to state a plausible claim. Halcyon surreplied. (Docket Entry Nos. 8-9, 10, 16, 19).

         After a careful review of the original and amended complaints; the motions, response, reply, and surreply; the properly considered documents; and the applicable law, the court denies the motion to dismiss. Halcyon has made a prima facie showing of specific jurisdiction, venue is proper, and the amended complaint has made moot the motions to dismiss for failure to state a claim and judgment on the pleadings. The reasons are explained in detail below.

         I. Background

         The facts are drawn from the amended complaint, the documents attached to it, and the parties' properly considered submissions. Halcyon, a company headquartered in Houston, Texas, develops tests to screen for medical conditions. (Docket Entry No. 9 at 1). Glatt is a New Jersey company that specializes in developing “solid dosage pharmaceuticals (tablets).” (Id. at 1-3). Glatt has no employees, bank accounts, property, service agent, or mailing addresses in Texas, and does not “advertise or regularly solicit business in Texas.” (Docket Entry No. 8-1 at 1-2).

         Halcyon's work on a test for sickle-cell disease required a tablet made of certain substances that would “dissolve[] completely.” (Docket Entry No. 9 at 3). In May 2017, Halcyon's president, Sean Gifford, viewed Glatt's website, which stated that Glatt had experience making dissolvable tablets. (Id. at 2-3). Gifford contacted Glatt through the website contact form, asking if Glatt could make fully dissolvable tablets to screen for sickle-cell disease. (Id. at 7). Gary Selander, Glatt's Senior Director of Business Development, responded that Glatt had “deep[]” experience making tablets and suggested a teleconference. (Id.). Halcyon signed a nondisclosure agreement and Steve Radovanovich, Glatt's Texas business director, scheduled a call. (Id. at 7-8).

         Between May and September 2017, Halcyon and Glatt spoke by phone and exchanged emails about the tablet requirements. (Id. at 2-11). Glatt assured Halcyon that it could make tablets that would dissolve down to particles of 2 to 3 micrometers within a couple minutes. (Id. at 3-4, 9-10). In September 2017, Glatt sent Halcyon a purchase order and a sales proposal. (Docket Entry Nos. 9-9, 9-11). Gifford signed the proposal in Texas. (Docket Entry No. 9 at 11). The sales proposal described the services that Glatt would provide and set out the terms governing the parties' relationship. Glatt had to:

develop a process of combining two individual materials Sodium Metabisulfite and Saponin in a solid dosage form. The solid dosage form may be a Mini Tablet or a Drug Coated & Encapsulated Pellet and will be used as part of a Medical Diagnostic Kit.

         (Docket Entry No. 9-9 at 3). Glatt would deliver the tablets to “ExWorks, Glatt facility, Ramsey, NJ”; Halcyon would be billed for shipping costs; New Jersey sales tax would apply; raw materials would be sent to Glatt's New Jersey address; and Glatt's work would conform with FDA and New Jersey standards. (Id. at 11, 15). The sales proposal warned that:

Glatt does not guarantee the successful outcome of any stage described in this Proposal. In the event of an error or omission in performance of services, Glatt's sole obligation and liability shall be to repeat the Services, or the affected part thereof, at no additional cost to the Client and at the earliest date as determined by Glatt.

(Id. at 16).

         By February 2018, Glatt had made sample tablets and sent some to Halcyon for testing, along with an invoice for $15, 446.24. (Docket Entry No. 9-1 at 7). Halcyon found that the tablets took more than a couple minutes to dissolve and contained an “enormous amount” of “insoluble components.” (Docket Entry No. 9-13). Over the next month, Glatt and Halcyon discussed over phone and by email how to change the tablets, discussing different formulas. (Docket Entry Nos. 9-13, 9-14). In April 2018, Glatt sent Halcyon new sample tablets and a second invoice, this one for $36, 651.65, for Glatt's work in March. (Docket Entry Nos. 9-14-9-15). Halcyon found that the samples still failed its requirements. (Docket Entry No. 9-1 at 7). Halcyon objected to the February and March invoices because it could not use the tablets. (Id. at 7-8). Glatt refused to do more work on the tablets until Halcyon paid the invoices. On May 2, 2018, Gifford and Selander agreed that Halcyon would pay $15, 446.24 of the invoices and that Glatt would try again to make a tablet meeting the requirements. (Id. at 8; Docket Entry No. 9-16). Halcyon wired the $15, 446.24 to Glatt on May 4. (Docket Entry No. 9-1 at 8).

         On May 17, Glatt “rescind[ed] the offer, ” declining to work on the tablets until Halcyon paid the $36, 561.65 left unpaid on the two invoices. (Docket Entry No. 9-19). Glatt stated that its work had been “reasonable” because Halcyon learned “important points about the technical specs required for the [tablets] to properly support the effectiveness of [the] diagnostic test.” (Docket Entry No. 9-17).

         The relationship between Halcyon and Glatt continued to sour. Gifford sent an email asking Selander to “confirm” in writing that Glatt would not ask Halcyon to pay the “potentially fraudulent” invoices. (Docket Entry No. 9-18 at 2). Glatt did not respond to that request, but offered to return Halcyon's “analytical column” and “mini-tab tablet press tooling” if Halcyon sent a “FedEx or UPS account number.” (Id.; Docket Entry No. 9-20). Halcyon provided a FedEx account number, but Glatt did not return the column or tooling. (Docket Entry No. 9-1 at 9).

         Halcyon sued Glatt, asserting fraudulent inducement, negligent misrepresentation, contract breach, conversion, and violations of the Texas Deceptive Trade Practices Act. (Docket Entry No. 9 at 16-34). Halcyon alleges that Glatt employees made intentional misrepresentations in emails and over phone conversations, inducing Halcyon to contract with Glatt and to partially pay the invoices; failed to disclose material information about the substances used in the sample ...


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