MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Linda Osei, Responsible Partner Priya Anand, Billing Partner
FROM: Patrick Gallagher, Working Associate
DATE: November 15, 2021
RE: discovery Status Update — Penterra Pharmaceuticals Corp. v. Vantage Medical Distribution, LLC, Docket No. 2184-CV-01537-BLS (MA Superior Court, Business Litigation Session, Suffolk County)
MATTER NO.: 1018-00007
CONFIDENTIALITY NOTICE: This memorandum constitutes attorney work product and is protected by the attorney-client privilege. It is prepared in connection with Calderwood & Harkness LLP's representation of Penterra Pharmaceuticals Corp. and is not to be disclosed outside the engagement team without express authorization. Any unauthorized review, use, disclosure, or distribution of this memorandum is strictly prohibited.
I. Purpose and Summary
The purpose of this memorandum is to provide an up-to-date summary of the status of fact discovery as of November 15, 2021, in the declaratory-judgment action filed by Penterra Pharmaceuticals Corp. ("Penterra" or "PPC") against Vantage Medical Distribution, LLC ("Vantage" or "VMD") in the Superior Court of Massachusetts, Business Litigation Session, before the Honorable Diane L. Costigan, J. This memorandum is intended to ensure that the responsible partner and billing partner have a comprehensive understanding of the current posture of the case from a discovery perspective, the key evidentiary developments to date, and the action items that remain before the close of fact discovery.
Discovery was initiated following the Initial Case Management Conference held on June 18, 2021, at which Judge Costigan entered the parties' agreed-upon scheduling order. Under that scheduling order, the close of fact discovery is set for January 14, 2022 — approximately two months from the date of this memorandum. The period remaining before the discovery close is compressed, and several important milestones must be met within that window.
By way of overview, the current status of discovery is as follows:
• Depositions: Two of four scheduled depositions have been completed — the deposition of Donald R. Farnham (Vantage's CEO) on October 18, 2021, and the deposition of Steven Kapoor (Penterra's VP of Commercial Operations) on November 2, 2021. The remaining two depositions — Rachel Mendez (Penterra's Director of Distribution & Logistics) on November 19, 2021, and Brian Kopec (Vantage's Outside Sales Director) on December 7, 2021 — are scheduled and on track.
• Document Productions: Document productions are substantially complete on both sides. Vantage has produced approximately 14,200 documents across three rolling tranches, and Penterra has produced approximately 8,600 documents across two rolling tranches.
• Written Interrogatories: Both parties have served and responded to their respective first sets of interrogatories. However, certain of Vantage's interrogatory responses remain arguably incomplete, particularly with respect to the identification of tri-state customer accounts and the methodology underlying Vantage's $35 million damages claim.
• Outstanding discovery Disputes: There are two active discovery disputes. First, Vantage has challenged 12 entries on Penterra's privilege log, contending that certain communications between Jennifer Chao (General Counsel) and Steven Kapoor are business communications rather than privileged legal communications. A meet-and-confer on this issue was held on October 11, 2021, without resolution, and HSP has indicated it may file a motion to compel. Second, Penterra is evaluating whether to seek more complete responses to Vantage's interrogatory answers regarding the tri-state customer list and damages methodology.
Each of these areas is addressed in detail in the sections that follow.
II. Key Litigation Background
A brief recitation of the key litigation background is provided here for context, particularly for Priya Anand's reference as billing partner.
Penterra filed its Complaint for Declaratory Judgment on April 12, 2021, seeking a judicial declaration that Vantage's exclusive distribution territory under the Exclusive Distribution Agreement dated July 1, 2017 (the "EDA") is limited to the six New England states — Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont — as expressly defined in Exhibit A to the EDA, and that the Territory does not encompass New York, New Jersey, or Pennsylvania (collectively, the "tri-state area"). The declaratory-judgment action was necessitated by Vantage's persistent claim that the Territory had been expanded to include the tri-state area, either by virtue of an alleged oral agreement, by the January 12, 2018 email from Steven Kapoor to Donald Farnham (the "Kapoor Email"), or by an alleged course of dealing.
Vantage filed its Answer and Counterclaims on May 14, 2021. In addition to denying the material allegations of the Complaint and asserting various affirmative defenses, Vantage asserted three counterclaims: (1) breach of contract, alleging that Penterra breached the EDA by refusing to recognize Vantage's expanded territory and by executing a term sheet with Meridian National Distributors, Inc. for distribution in the tri-state area; (2) breach of the implied covenant of good faith and fair dealing, alleging that Penterra undermined Vantage's reasonable expectations under the EDA; and (3) promissory estoppel, alleging that Vantage relied to its detriment on the Kapoor Email and related oral representations. Vantage seeks damages in the amount of $35 million on its counterclaims.
Penterra filed its Answer to Counterclaims on June 4, 2021, denying Vantage's counterclaim allegations and asserting affirmative defenses including the statute of frauds, the parol evidence rule, failure to satisfy conditions precedent (namely, the written-consent requirement of Section 2.3 and the written-amendment requirement of Section 13.1), and failure to mitigate damages.
Products at Issue. The products distributed by Vantage under the EDA are Oncalaris® (pegvisomant-axel), available in 20 mg and 40 mg vials, and Renuvesta® (cilosporin-beta), available in 5 mg capsules. While both products are covered by the EDA, the territory dispute centers primarily on Oncalaris®, which is the higher-revenue product and the product that Vantage shipped into the tri-state area. Oncalaris® is an injectable oncology product used in the treatment of certain growth-hormone-secreting tumors, and it is distributed primarily to hospitals and oncology clinics. The tri-state area represents a significantly larger market for Oncalaris® than the New England Territory alone, which is a key driver of this dispute.
Vantage's Unauthorized Tri-State Activity. According to the records produced in discovery, Vantage commenced unauthorized shipments of Oncalaris® into the tri-state area on or about September 14, 2020. Between September 2020 and March 2021, Vantage generated approximately $6.4 million in revenues from tri-state sales. These shipments were directed by Vantage's Outside Sales Director, Brian Kopec, at the instruction of Donald Farnham, and were made without any signed amendment to the EDA or written consent from Penterra. Penterra first learned of these unauthorized shipments in approximately late February 2021, and Jennifer Chao, Penterra's General Counsel, sent a cease-and-desist letter to Donald Farnham on March 8, 2021, demanding that Vantage immediately cease all distribution activity outside the six New England states.
Opposing Counsel. Vantage is represented by Kenneth M. Rourke (lead partner) and Alicia Fontaine (associate counsel) of Hargrove, Sinclair & Polk LLP ("HSP"), located at 200 Ashbury Asset Advisors, Suite 1800, Boston, MA 02109. Rourke is an experienced commercial litigator who has been active and aggressive in the discovery process, though the relationship between counsel has remained professional to date.
III. Written discovery — Penterra's Requests to Vantage
A. Penterra's First Set of Interrogatories to Vantage
Penterra's First Set of Interrogatories to Defendant Vantage Medical Distribution, LLC was served on August 9, 2021. The set contains 25 interrogatories, which is the maximum permitted under the Massachusetts Rules of Civil Procedure, as applicable in the Business Litigation Session, absent leave of court. The interrogatories were drafted by Hannah Brinkley and Patrick Gallagher, with review and input from Linda Osei.
The interrogatories were designed to address the following core areas of inquiry:
(a) Vantage's understanding of the Territory as defined in Exhibit A to the EDA at the time the EDA was executed on July 1, 2017;
(b) The factual basis for Vantage's claim that the January 12, 2018 Kapoor Email constituted written consent under Section 2.3 of the EDA, an amendment under Section 13.1, or otherwise authorized Vantage to distribute Oncalaris® or Renuvesta® outside the six New England states;
(c) The identities and roles of all persons involved in initiating, directing, or executing tri-state sales, including but not limited to Brian Kopec, Donald Farnham, and any Vantage sales representatives or logistics personnel;
(d) The total volume and revenue of tri-state shipments, broken down by state, customer account, and time period;
(e) All communications between Vantage personnel and Penterra personnel regarding territory expansion, whether written or oral, from the date of the EDA through the present; and
(f) The factual and methodological basis for Vantage's $35 million damages claim, including identification of all categories of alleged damages, the time period over which damages are calculated, and the assumptions underlying the damages figure.
Vantage's responses were received on September 22, 2021, which was timely under the applicable rules.
Assessment of Responses. Vantage provided substantive responses to the majority of the interrogatories. In particular, Vantage identified Donald Farnham, Brian Kopec, and several other Vantage personnel by name and role in connection with the tri-state sales initiative, and Vantage provided a general narrative regarding its understanding of the Territory and its reliance on the Kapoor Email. However, certain responses were evasive or incomplete in material respects:
• Interrogatory No. 14 (requesting identification of all customer accounts solicited in the tri-state area): Vantage objected on the grounds of overbreadth and commercial sensitivity, asserting that the request was unduly burdensome and that the identity of its customer accounts constituted confidential business information. Despite these objections, Vantage provided a partial list of 22 customer accounts in the tri-state area. Based on our review of the shipping records produced by Vantage (VMD 008001–008247), we believe that additional customer accounts exist that were not identified in Vantage's response. The shipping records reflect deliveries to at least 31 distinct addresses in New York, New Jersey, and Pennsylvania, which suggests that the partial list of 22 accounts is incomplete.
• Interrogatory No. 21 (requesting the factual and methodological basis for Vantage's $35 million damages claim): Vantage stated that its damages figure is "still being developed with the assistance of its accounting advisors, Cranmer, Hodges & Associates, P.C." Vantage provided only a general description of its damages theory, stating that damages include lost profits from the tri-state territory over the remaining term of the EDA, lost business goodwill, and expenditures incurred in reliance on the alleged territorial expansion. Vantage did not provide any calculation, methodology, or supporting data. This response is insufficient under the Massachusetts Rules of Civil Procedure, which require that interrogatory responses be answered "separately and fully" and that objections be stated "with specificity."
We are currently evaluating whether a motion to compel more complete responses to Interrogatories Nos. 14 and 21 is warranted before the discovery close. This issue is discussed further in Section VI.B below.
B. Penterra's First Request for Production of Documents to Vantage
Penterra's First Request for Production of Documents to Defendant Vantage Medical Distribution, LLC was served on August 9, 2021, contemporaneously with the first set of interrogatories. The request comprises 30 document requests covering the following categories:
(a) The executed EDA and all exhibits, schedules, amendments, and side letters;
(b) All communications between Vantage personnel and Penterra personnel regarding the Territory or any potential expansion of the Territory, whether by email, letter, text message, or any other medium;
(c) All internal Vantage communications — including but not limited to emails, memoranda, text messages, instant messages, and meeting notes — regarding tri-state sales, the Territory, or the Kapoor Email;
(d) All sales and shipping records for Oncalaris® and Renuvesta® shipments to any location outside the six New England states, including but not limited to invoices, purchase orders, bills of lading, shipping confirmations, and delivery receipts;
(e) All financial records, reports, projections, analyses, and summaries supporting or relating to Vantage's $35 million counterclaim, including any documents prepared by or in consultation with Cranmer, Hodges & Associates, P.C.;
(f) All records regarding Vantage's relationships with hospitals, oncology clinics, pharmacies, and other customers in New York, New Jersey, and Pennsylvania, including but not limited to account files, correspondence, contracts, and pricing agreements.
Vantage's Production. Vantage produced documents in three rolling tranches, as follows:
In total, Vantage has produced approximately 14,200 documents bearing Bates stamps VMD 000001 through VMD 014200. The productions were made in TIFF format with extracted text and metadata, hosted on our relativity review platform.
Key Documents Produced. The following categories of documents are among the most significant produced by Vantage to date:
1. Internal Vantage emails and memoranda regarding tri-state solicitation: These documents show that Brian Kopec, Vantage's Outside Sales Director, actively solicited customer accounts in New York, New Jersey, and Pennsylvania beginning in approximately late summer 2020. Several emails between Kopec and Farnham discuss specific hospital contacts and pricing proposals for tri-state accounts. See, e.g., VMD 004312–004318.
2. Shipping records confirming tri-state shipments: Vantage's shipping and logistics records confirm that the first shipment of Oncalaris® to an address outside New England was made on or about September 14, 2020, to a hospital in Albany, New York. Subsequent shipments were made throughout the fall of 2020 and into 2021. See VMD 008001–008247.
3. Vantage financial summaries: Vantage produced internal financial summaries showing that tri-state revenues totaled approximately $6.4 million from September 2020 through March 2021. These summaries break down revenue by state and by quarter, and they are generally consistent with the shipping records produced.
4. Farnham internal communications regarding the Kapoor Email: Several of Farnham's internal emails and memoranda reference the January 12, 2018 Kapoor Email as the basis for Vantage's belief that it was authorized to expand into the tri-state area. In one such email, dated August 3, 2020, Farnham wrote to Kopec: "Steven's email from '18 gives us the green light to start building out the tri-state market. Let's get moving." See VMD 003487.
Gaps and Issues. Vantage has not produced documents responsive to Request No. 22, which sought all communications between Vantage personnel and Vantage's outside counsel, Hargrove, Sinclair & Polk LLP, regarding the territory dispute. Vantage has asserted attorney-client privilege over these communications. A privilege log was provided with the third tranche of production on November 5, 2021. That privilege log is the subject of an ongoing dispute, which is discussed in detail in Section VI.A below. We do not challenge Vantage's assertion of privilege over communications with HSP, as these are facially privileged attorney-client communications. Rather, the privilege log dispute concerns Penterra's own privilege log, as discussed below.
No other material gaps in Vantage's production have been identified at this time, though document review is ongoing.
IV. Written discovery — Vantage's Requests to Penterra
A. Vantage's First Set of Interrogatories to Penterra
Vantage's First Set of Interrogatories to Plaintiff Penterra Pharmaceuticals Corp. was served on September 3, 2021. Penterra's responses were served on October 4, 2021, which was timely, following a three-day extension agreed to by HSP to accommodate the Columbus Day holiday weekend. The responses were prepared by Hannah Brinkley and Patrick Gallagher, reviewed and approved by Linda Osei, and verified by Jennifer Chao, Penterra's General Counsel, on behalf of Penterra.
Vantage's interrogatories focused on the following areas:
(a) The negotiation history of the EDA, including the identities of all persons involved in negotiating the terms of Exhibit A and the Territory definition;
(b) Penterra's understanding of the scope and meaning of Exhibit A at the time of execution of the EDA;
(c) The circumstances surrounding the January 12, 2018 Kapoor Email, including the context in which it was sent, any internal discussions at Penterra before or after the email was sent, and Penterra's position on whether the email constituted consent, an amendment, or a commitment of any kind;
(d) Penterra's dealings with Meridian National Distributors, Inc. ("Meridian"), including the circumstances surrounding the February 15, 2021 term sheet for distribution in New York, New Jersey, Pennsylvania, and Maryland;
(e) Penterra's awareness of Vantage's tri-state shipments prior to the March 8, 2021 cease-and-desist letter, and the actions Penterra took (or did not take) upon learning of those shipments; and
(f) Penterra's position on the scope of the Territory and its basis for seeking declaratory relief.
Summary of Key Positions Taken in Penterra's Responses. Penterra's interrogatory responses articulated the following key positions, which are consistent with our litigation strategy and the deposition testimony of Steven Kapoor:
1. The Territory is limited to the six New England states as expressly defined in Exhibit A to the EDA. The Territory definition was negotiated at arm's length and was specifically agreed upon by both parties at the time of execution.
2. The January 12, 2018 Kapoor Email expressed a general willingness to explore the possibility of future territorial expansion but did not constitute "prior written consent" under Section 2.3 of the EDA, nor did it constitute a written amendment signed by both parties as required by Section 13.1. The email was aspirational and forward-looking, and it was expressly conditioned on future discussions and evaluation.
3. Penterra executed a term sheet with Meridian National Distributors, Inc. on February 15, 2021, for distribution of Oncalaris® and Renuvesta® in New York, New Jersey, Pennsylvania, and Maryland. Penterra was entitled to engage a distributor for territories outside the scope of Vantage's exclusive Territory, and the Meridian term sheet does not constitute a breach of the EDA.
4. Penterra first learned of Vantage's unauthorized tri-state shipments in approximately late February 2021, when Rachel Mendez identified anomalies in distribution data suggesting that Vantage was shipping product to addresses outside of New England. Upon confirming the unauthorized activity, Jennifer Chao sent the March 8, 2021 cease-and-desist letter to Donald Farnham, demanding that Vantage immediately cease all distribution activity outside the six New England states.
B. Vantage's First Request for Production of Documents to Penterra
Vantage's First Request for Production of Documents to Plaintiff Penterra Pharmaceuticals Corp. was served on September 3, 2021, contemporaneously with its first set of interrogatories. Penterra produced responsive documents in two rolling tranches:
In total, Penterra has produced approximately 8,600 documents bearing Bates stamps PPC 000001 through PPC 008600. All productions were made in TIFF format with extracted text and metadata.
Key Documents Produced. The following are among the most significant documents produced by Penterra:
1. The executed EDA and all exhibits: Including Exhibit A (Territory Definition), which unambiguously defines the Territory as the six New England states. See PPC 000001–000047.
2. The complete email chain surrounding the January 12, 2018 Kapoor Email: Including the initial email from Farnham to Kapoor raising the possibility of expansion, Kapoor's January 12, 2018 reply, and several subsequent emails in which the parties discuss scheduling a follow-up call. The chain does not contain any language that could be construed as a binding commitment or formal consent. See PPC 001203–001211.
3. Steven Kapoor's internal communications: Including emails between Kapoor and other Penterra executives (including Jennifer Chao and Rachel Mendez) regarding Vantage's sales performance, the possibility of territorial expansion, and the internal assessment that any expansion would require a formal amendment to the EDA. See PPC 002340–002389.
4. The Meridian term sheet dated February 15, 2021: A non-binding term sheet between Penterra and Meridian National Distributors, Inc. (President: Thomas Welliver) for exclusive distribution of Oncalaris® and Renuvesta® in New York, New Jersey, Pennsylvania, and Maryland. See PPC 004102–004108.
5. Jennifer Chao's March 8, 2021 cease-and-desist letter: Addressed to Donald Farnham, demanding that Vantage immediately cease all solicitation, sale, and delivery of Penterra products outside the six New England states and reserving all of Penterra's rights and remedies under the EDA. See PPC 004501–004503.
6. Rachel Mendez's distribution and logistics records: Including internal distribution system reports showing that Penterra's logistics systems directed Oncalaris® shipments to Vantage solely for delivery to addresses within the New England Territory. No shipments were authorized or directed by Penterra for delivery to tri-state addresses through Vantage. See PPC 005301–005487.
7. Vantage purchase records: Penterra produced its internal records of Vantage's purchase volumes for the Products under the EDA, which reflect the following annual totals:
These figures reflect significant and consistent growth in Vantage's purchases over the life of the EDA, substantially exceeding the $9.5 million annual minimum purchase requirement set forth in the EDA.
Privilege Assertions. Penterra asserted attorney-client privilege and/or work-product protection over certain categories of documents, specifically: (a) attorney-client communications between Penterra personnel and Calderwood & Harkness LLP, and (b) pre-litigation communications between Jennifer Chao (in her capacity as General Counsel) and other Penterra executives made for the purpose of obtaining or providing legal advice in connection with the Vantage territory dispute. A privilege log was produced with the first tranche of production on October 15, 2021, and was supplemented with the second tranche on November 1, 2021. In total, 47 documents are listed on Penterra's privilege log.
Outstanding Issue. Vantage has challenged 12 of the 47 entries on Penterra's privilege log, contending that certain communications between Jennifer Chao and Steven Kapoor, dated between January 2021 and March 2021, are business communications rather than privileged legal communications. This dispute is discussed in detail in Section VI.A below.
V. Depositions
A. Depositions Completed
1. Deposition of Donald R. Farnham — October 18, 2021
Witness: Donald R. Farnham, Managing Member and Chief Executive Officer of Vantage Medical Distribution, LLC.
Location: Offices of Hargrove, Sinclair & Polk LLP, 200 Ashbury Asset Advisors, Suite 1800, Boston, Massachusetts.
Duration: Approximately 6 hours, including breaks.
Examining Counsel: Hannah Brinkley (Calderwood & Harkness LLP).
Defending Counsel: Kenneth M. Rourke (Hargrove, Sinclair & Polk LLP).
Key Testimony Highlights:
The Farnham deposition was productive and yielded several admissions that are highly favorable to Penterra's position. The key testimony highlights are as follows:
(a) No signed amendment to Exhibit A: Farnham admitted that he did not obtain a signed amendment to Exhibit A before commencing tri-state shipments. When asked directly whether he possessed any document signed by both Penterra and Vantage that modified the Territory defined in Exhibit A, Farnham answered "No." This admission is critical, as it confirms the absence of the written instrument required by Section 13.1 of the EDA.
(b) Reliance on the Kapoor Email: Farnham stated that he relied on the January 12, 2018 Kapoor Email as the basis for believing Penterra had consented to territorial expansion. He testified that he interpreted the phrase "We're definitely open to exploring expansion into NY/NJ/PA once your New England footprint is fully ramped" as a "go-ahead" to begin building out tri-state distribution once Vantage had established a strong presence in New England.
(c) No express written authorization beyond the Kapoor Email: Farnham acknowledged that no Penterra officer expressly authorized tri-state shipments in writing beyond the Kapoor Email. Farnham referenced several telephone calls with Kapoor in mid-2018 in which he claims the expansion was discussed further, but he was unable to identify any written confirmation of any agreement reached during those calls.
(d) Direction to Brian Kopec: Farnham testified that he directed Brian Kopec, Vantage's Outside Sales Director, to begin soliciting customer accounts in the tri-state area in approximately August 2020. Farnham testified that he made this decision based on his belief that Penterra had consented to expansion and that Vantage's New England footprint was "fully ramped" at that point.
Transcript Status: The final transcript was received on October 29, 2021. The errata sheet deadline is November 19, 2021. We are monitoring for any errata filed by HSP on Farnham's behalf.
Detailed Analysis: A comprehensive deposition summary memorandum was prepared by Hannah Brinkley and is dated October 22, 2021. See Deposition Summary Memorandum — Donald R. Farnham (filed in the matter folder). That memorandum includes a topic-by-topic breakdown of the testimony, key transcript citations, and an assessment of the witness's credibility and demeanor.
2. Deposition of Steven Kapoor — November 2, 2021
Witness: Steven Kapoor, Vice President of Commercial Operations, Penterra Pharmaceuticals Corp.
Location: Offices of Calderwood & Harkness LLP, 1 Federal Street, 35th Floor, Boston, Massachusetts.
Duration: Approximately 5.5 hours, including breaks.
Examining Counsel: Kenneth M. Rourke and Alicia Fontaine (Hargrove, Sinclair & Polk LLP).
Defending Counsel: Linda Osei and Hannah Brinkley (Calderwood & Harkness LLP).
Key Testimony Highlights:
The Kapoor deposition was well-defended, and the witness performed admirably. His testimony was consistent with Penterra's litigation position throughout, and opposing counsel was unable to elicit any significant concessions. The key testimony highlights are as follows:
(a) Kapoor Email was aspirational: Kapoor testified that his January 12, 2018 email to Farnham expressed a willingness to explore the possibility of future territorial expansion but did not grant consent or amend the Territory. Kapoor was clear and emphatic on this point, stating: "That email was me saying we were open to a conversation down the road. It was not a commitment. It was not consent. It was not an amendment."
(b) Language was forward-looking and conditional: Kapoor testified that the phrase "We're definitely open to exploring expansion into NY/NJ/PA once your New England footprint is fully ramped" was aspirational and expressly subject to further negotiation and a formal written amendment. He pointed to the phrase "exploring" and "once your New England footprint is fully ramped" as indicating that the email was prospective and conditional, not present and unconditional.
(c) No subsequent written agreement: Kapoor confirmed that no subsequent written agreement or amendment to Exhibit A was ever executed between Penterra and Vantage regarding the Territory. Kapoor testified that while he had several telephone conversations with Farnham during 2018 in which the possibility of expansion was discussed, no commitments were made during those calls, and both parties understood that any expansion would require a formal written amendment to the EDA.
(d) Penterra's distribution systems: Kapoor testified that Penterra's internal distribution systems directed Oncalaris® shipments to Vantage only for delivery to addresses within the New England Territory, and that Penterra did not authorize or direct any shipments to Vantage for delivery to tri-state addresses.
Preparation and Defense Notes: Kapoor was well-prepared for the deposition, having participated in two preparation sessions with Linda Osei, Hannah Brinkley, and Patrick Gallagher. His testimony was consistent throughout the examination, and he did not volunteer information beyond the scope of the questions asked. Rourke attempted on several occasions to elicit concessions regarding alleged oral agreements or understandings reached during telephone calls between Kapoor and Farnham in mid-2018, but Kapoor maintained that no commitments were made during those calls and that both parties understood the written-amendment requirement. Rourke also pressed Kapoor on the use of the word "definitely" in the Kapoor Email, but Kapoor credibly explained that the word modified "open to exploring," not "will expand." No significant damaging testimony was elicited during the examination.
Transcript Status: A rough transcript was received on November 5, 2021. The final transcript is expected by approximately November 16, 2021. The errata sheet deadline will be 30 days after receipt of the final transcript.
Detailed Analysis: A deposition summary memorandum was prepared by Patrick Gallagher and is dated November 5, 2021. See Deposition Summary Memorandum — Steven Kapoor (filed in the matter folder).
B. Depositions Remaining
1. Deposition of Rachel Mendez — Scheduled November 19, 2021
Witness: Rachel Mendez, Director of Distribution & Logistics, Penterra Pharmaceuticals Corp.
Location: Offices of Calderwood & Harkness LLP, 1 Federal Street, 35th Floor, Boston, Massachusetts.
Anticipated Examining Counsel: Alicia Fontaine (Hargrove, Sinclair & Polk LLP).
Defending Counsel: Hannah Brinkley (Calderwood & Harkness LLP).
Anticipated Topics: We anticipate that Vantage's counsel will focus the Mendez deposition on the following areas:
(a) Penterra's distribution logistics framework, including how shipments of Oncalaris® and Renuvesta® are directed to distributors and how the distribution system tracks and limits shipments to authorized territories;
(b) How shipments were specifically directed to Vantage for New England addresses, and whether the distribution system contains any mechanism for preventing or flagging shipments to out-of-territory addresses;
(c) Whether Penterra's systems ever processed, authorized, or facilitated shipments to tri-state addresses through Vantage, or whether Vantage's tri-state shipments were made entirely from Vantage's own inventory after receipt of product from Penterra;
(d) Mendez's knowledge of Vantage's tri-state distribution activity, including when she first became aware of it and what actions she took upon discovering it; and
(e) The anomalies in distribution data that Mendez identified in late February 2021, which led to the discovery of Vantage's unauthorized tri-state shipments and ultimately to the March 8, 2021 cease-and-desist letter.
Preparation Status: A witness preparation session is scheduled for November 17, 2021, with Hannah Brinkley and Patrick Gallagher. We have assembled the key documents that are likely to be used at the deposition, including Mendez's internal distribution reports (PPC 005301–005487), relevant correspondence with Kapoor and Chao, and the shipping and logistics records produced by both parties.
Note: Rachel Mendez is Penterra's witness, and our role in this deposition is to defend. We do not anticipate significant risk from this deposition, as Mendez's testimony is expected to support Penterra's position that its distribution systems were configured solely for New England deliveries to Vantage and that Penterra was unaware of Vantage's tri-state shipments until late February 2021.
2. Deposition of Brian Kopec — Scheduled December 7, 2021
Witness: Brian Kopec, Outside Sales Director, Vantage Medical Distribution, LLC.
Location: Offices of Hargrove, Sinclair & Polk LLP, 200 Ashbury Asset Advisors, Suite 1800, Boston, Massachusetts.
Anticipated Examining Counsel: Hannah Brinkley or Patrick Gallagher (Calderwood & Harkness LLP) — assignment to be confirmed by Linda Osei.
Defending Counsel: Kenneth M. Rourke or Alicia Fontaine (Hargrove, Sinclair & Polk LLP).
Anticipated Topics: The Kopec deposition is a critical opportunity to develop the factual record regarding the details of Vantage's unauthorized tri-state sales activities. We anticipate examining Kopec on the following topics:
(a) Kopec's role and responsibilities as Outside Sales Director, including his specific involvement in directing Oncalaris® sales into New York, New Jersey, and Pennsylvania;
(b) Kopec's knowledge of the territory restrictions set forth in Exhibit A and Section 2.3 of the EDA, and whether he was aware that Vantage's exclusive Territory was limited to the six New England states;
(c) The specific customer contacts and solicitation activities Kopec undertook in the tri-state area, including the identities of hospitals, oncology clinics, and other accounts he solicited, the dates of initial contact, and the sales pitches or representations he made to those accounts;
(d) The approximately $6.4 million in tri-state revenues generated by Vantage between September 2020 and March 2021, including the breakdown by customer, by state, and by product;
(e) Kopec's communications with Farnham regarding the authorization for tri-state sales, including any discussions of the Kapoor Email, the EDA's territorial restrictions, or the need for a formal amendment;
(f) Any communications between Kopec and Penterra personnel regarding the scope of the Territory or Vantage's plans to expand into the tri-state area; and
(g) Kopec's understanding of the basis on which Vantage believed it was authorized to distribute outside New England.
Preparation Status: Patrick Gallagher is currently preparing the deposition outline for the Kopec deposition. A draft outline is expected to be circulated for review by late November 2021. See forthcoming Deposition Outline — Brian Kopec.
Key Documents to Use at Deposition: The following documents have been flagged for use during the Kopec deposition:
• Internal Vantage emails (VMD 004312–004318) showing Kopec's active solicitation of tri-state customer accounts, including specific outreach to hospitals in New York and New Jersey;
• Vantage shipping records (VMD 008001–008247) documenting tri-state deliveries, which can be used to walk Kopec through specific shipments and confirm dates, destinations, and quantities;
• Kopec's communications with Farnham regarding territory expansion, including the August 3, 2020 email from Farnham to Kopec (VMD 003487) stating: "Steven's email from '18 gives us the green light to start building out the tri-state market. Let's get moving";
• The EDA and Exhibit A (PPC 000001–000047), which Kopec should be asked to review and confirm his understanding of.
C. Third-Party Depositions
No third-party depositions have been noticed by either party, and none are currently anticipated.
Meridian National Distributors, Inc., whose President is Thomas Welliver, is a potential third-party witness with knowledge regarding the February 15, 2021 term sheet between Penterra and Meridian for distribution of Oncalaris® and Renuvesta® in New York, New Jersey, Pennsylvania, and Maryland. However, we do not anticipate that Welliver's testimony will be necessary for purposes of summary judgment. Penterra's own records and the term sheet itself (PPC 004102–004108) are sufficient to establish the relevant facts — namely, that Penterra entered into the Meridian term sheet in the exercise of its contractual rights to engage a distributor for territories outside the scope of Vantage's exclusive Territory.
If Vantage notices a deposition of Thomas Welliver, we will need to coordinate with Meridian's counsel to ensure that Penterra's interests are protected and that any testimony regarding the term sheet is consistent with the terms of the non-disclosure provisions in the term sheet. As of the date of this memorandum, there is no indication from HSP that such a deposition is planned. We will continue to monitor Vantage's discovery activity for any third-party subpoenas.
VI. Outstanding discovery Disputes
A. Privilege Log Dispute
Background. As noted in Section IV.B above, Penterra produced a privilege log with its first tranche of documents on October 15, 2021, and supplemented the log with its second tranche on November 1, 2021. The privilege log identifies a total of 47 documents withheld on the basis of attorney-client privilege, work-product protection, or both. Of these 47 entries, Vantage has challenged 12.
On October 4, 2021, Hannah Brinkley sent a meet-and-confer letter to Kenneth M. Rourke of HSP regarding Vantage's challenge to the 12 entries on Penterra's privilege log. The letter set forth Penterra's position on the privilege assertions and invited Rourke to discuss the matter telephonically.
Vantage's Position. Vantage contends that certain communications between Jennifer Chao (Penterra's General Counsel) and Steven Kapoor, dated between January 2021 and March 2021, are business communications rather than privileged legal communications. Vantage argues that Chao, as a member of Penterra's executive team, was communicating with Kapoor in her capacity as a business executive, not in her capacity as an attorney, and that the communications relate to operational and strategic business decisions rather than the provision of legal advice. Vantage further argues that several of the challenged log entries contain insufficient descriptions to sustain a claim of privilege.
Penterra's Position. We maintain that the 12 challenged communications are squarely within the scope of the attorney-client privilege and, in certain instances, are also protected by the work-product doctrine. The communications were made between January and March 2021, a period during which Penterra was actively investigating Vantage's unauthorized tri-state shipments and evaluating its legal options, including the possibility of sending the March 8, 2021 cease-and-desist letter and filing the instant declaratory-judgment action. Jennifer Chao, as General Counsel, was acting in her legal capacity in advising Kapoor and other Penterra executives on the contractual interpretation of the EDA, the legal implications of Vantage's unauthorized activity, and the litigation risk associated with various courses of action. The fact that Chao also holds the title of General Counsel and participates in executive-level meetings does not strip her communications of privilege when those communications are made for the purpose of providing legal advice.
Massachusetts law recognizes that in-house counsel communications are privileged when the predominant purpose of the communication is the provision or receipt of legal advice, even if the communication also touches upon business matters. See Suffolk Constr. Co. v. Division of Capital Asset Mgmt., 449 Mass. 444, 449 (2007); Commissioner of Revenue v. Granite Harbor Partners LLC, 453 Mass. 293, 310 (2009). The challenged communications here are predominantly legal in nature, as they address the interpretation of specific contract provisions, the sufficiency of the Kapoor Email as a matter of contract law, and the strategy for enforcing Penterra's contractual rights.
Current Status. A telephonic meet-and-confer was held on October 11, 2021, between Hannah Brinkley and Kenneth Rourke. The conference did not result in resolution. Rourke indicated that HSP may file a motion to compel production of the 12 challenged documents. As of the date of this memorandum, no such motion has been filed.
Recommendation. If HSP files a motion to compel, we should oppose on the grounds set forth above. In the event the court requests in camera review of the challenged documents, we should prepare an in camera submission consisting of the 12 challenged documents, accompanied by a supporting declaration from Jennifer Chao describing the circumstances in which each communication was made and its predominantly legal purpose. We should also cite the applicable Massachusetts authority on in-house counsel privilege. Given the January 14, 2022 discovery close, any motion practice on this issue should be expedited. We note that any motion to compel should be filed well before the discovery close to permit briefing and a ruling.
B. Vantage's Incomplete Interrogatory Responses
As discussed in Section III.A above, Vantage's responses to two of Penterra's interrogatories are arguably incomplete and may warrant further action:
Interrogatory No. 14 (Tri-State Customer Accounts). Vantage objected to this interrogatory on the grounds of overbreadth and commercial sensitivity and provided a partial list of 22 customer accounts in the tri-state area. However, Vantage's own shipping records (VMD 008001–008247) reflect deliveries to at least 31 distinct addresses in New York, New Jersey, and Pennsylvania. The discrepancy between the 22 customer accounts identified in the interrogatory response and the 31 shipping addresses in the production suggests that additional customer accounts exist that were not disclosed. A complete accounting of Vantage's tri-state customer base is relevant to both Penterra's declaratory-judgment claims and Vantage's damages counterclaims, and the commercial sensitivity objection can be addressed through the existing Confidentiality Stipulation and Protective Order entered by the court on July 22, 2021.
Interrogatory No. 21 (Damages Methodology). Vantage's response that its $35 million damages figure is "still being developed" with the assistance of Cranmer, Hodges & Associates, P.C. is insufficient under the Massachusetts Rules of Civil Procedure. An interrogatory response that a damages calculation is "still being developed" does not satisfy the requirement that interrogatory answers be "separately and fully" answered. Vantage is obligated to provide the factual basis for its damages claim to the extent known at the time of the response, including the categories of damages sought, the time periods involved, and the assumptions underlying the $35 million figure. If Vantage's damages theory is genuinely still under development, it should at a minimum provide the framework of its calculation and supplement its response as the calculation is finalized, rather than defer the entirety of its answer.
Recommendation. We recommend that Patrick Gallagher send a follow-up meet-and-confer letter to HSP by November 22, 2021, specifically requesting that Vantage provide supplemental responses to Interrogatories Nos. 14 and 21 by December 3, 2021. The letter should clearly articulate the deficiencies in Vantage's current responses and put HSP on notice that Penterra will file a motion to compel if supplemental responses are not provided. If the meet-and-confer process does not resolve the issue, we should evaluate whether to file a motion to compel before the January 14, 2022 discovery close. Given the compressed timeline, any such motion should be filed no later than mid-December 2021 to allow for briefing and a ruling before the close of discovery.
VII. Document Review and Key Evidence Summary
A. Key Favorable Documents
The following documents are among the most significant pieces of evidence supporting Penterra's position in this case. These documents should form the backbone of our anticipated summary judgment motion:
1. Exhibit A to the EDA (Territory Definition). Exhibit A unambiguously defines the Territory as: "The states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont (collectively, the 'New England States')." There is no reference to New York, New Jersey, or Pennsylvania in Exhibit A, and the definition is clear and specific. This is the single most important document in the case, and its plain language should be dispositive of the declaratory-judgment claim.
2. Section 2.3 of the EDA (Limitation on Out-of-Territory Activity). Section 2.3 provides: "Distributor shall not actively solicit orders for, or deliver, the Products outside the Territory without Supplier's prior written consent." This provision establishes a clear requirement of "prior written consent" for any out-of-territory activity, which Vantage admittedly did not obtain.
3. Section 13.1 of the EDA (Amendments). Section 13.1 provides: "No amendment, modification, or waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by both parties." This provision bars any claim that the Territory was modified by oral agreement, email, or course of dealing.
4. Section 14.8 of the EDA (Entire Agreement / Integration Clause). Section 14.8 provides that the EDA, together with its exhibits and schedules, constitutes the entire agreement of the parties and supersedes all prior negotiations, representations, or agreements, whether written or oral. This provision reinforces the conclusion that the written terms of the EDA — including Exhibit A — are the sole expression of the parties' agreement regarding the Territory.
5. The January 12, 2018 Kapoor Email. While Vantage relies on this email as the foundation of its defense and counterclaims, the email, read in its entirety and in context, is aspirational and forward-looking. The key sentence reads: "We're definitely open to exploring expansion into NY/NJ/PA once your New England footprint is fully ramped." The email does not use the words "consent," "amend," "authorize," or "approve." It uses the word "exploring," which connotes a preliminary and conditional inquiry, not a binding commitment. The email further states: "Let's circle back mid-year and see where things stand," confirming that no decision had been made.
6. Farnham Deposition Testimony (October 18, 2021). Farnham's admission that no signed amendment to Exhibit A was obtained before Vantage commenced tri-state shipments, and his acknowledgment that no Penterra officer expressly authorized tri-state shipments in writing beyond the Kapoor Email, are powerful admissions that support Penterra's position on summary judgment.
7. Kapoor Deposition Testimony (November 2, 2021). Kapoor's consistent and credible testimony that the January 12, 2018 email was aspirational and did not constitute consent or amendment provides strong support for Penterra's interpretation of the email and the EDA.
B. Key Adverse or Concerning Documents
In the interest of providing a balanced assessment, the following documents or evidentiary issues present potential challenges for Penterra's position:
1. The Kapoor Email Language ("We're definitely open to exploring expansion"). While we maintain that this language is aspirational and forward-looking, Vantage will undoubtedly argue that it created a reasonable expectation of expansion and that Farnham was justified in interpreting it as a signal of consent. The word "definitely" may be highlighted by Vantage as reflecting a firm commitment rather than a tentative expression of interest. We will need to address this language directly in our summary judgment briefing, emphasizing that "definitely open to exploring" is not the equivalent of "we consent" or "we agree," and that the email's conditional language ("once your New England footprint is fully ramped" and "let's circle back mid-year") negates any inference of a present, unconditional commitment.
2. Absence of Contemporaneous Objection (Late 2019 – February 2021). Vantage's discovery production includes shipping records suggesting that some limited Oncalaris® shipments were made to a hospital in New York as early as late 2019. See VMD 007814–007819. Penterra did not send a cease-and-desist letter until March 8, 2021, approximately 15 to 18 months after the earliest recorded tri-state shipment. Vantage will likely argue that this delay supports a course-of-dealing modification of the Territory, or alternatively, that Penterra's silence constituted a waiver of its right to enforce the territorial restrictions. This is a factual issue that requires careful attention. However, several factors mitigate this concern: (i) Rachel Mendez may be able to testify at her deposition on November 19, 2021, that Penterra was unaware of the early New York shipments until late February 2021, which would negate any inference of acquiescence; (ii) the volume of early tri-state shipments appears to have been small relative to Vantage's overall business, making it plausible that the shipments went undetected; and (iii) the integration clause (Section 14.8) and the written-amendment requirement (Section 13.1) should preclude any claim of implied modification under Massachusetts law. Massachusetts courts have consistently held that where a contract contains a no-oral-modification clause, a party cannot establish modification by course of dealing absent clear and unequivocal conduct. See Cambridgeport Sav. Bank v. Boersner, 413 Mass. 432, 439 (1992).
3. Vantage's Growth in Oncalaris® Purchases. Vantage's purchases of Penterra products grew from $11.2 million in FY 2018 to $14.8 million in FY 2019, to $18.3 million in FY 2020, and were on pace for approximately $21.47 million (annualized) in FY 2021. This growth substantially exceeded the $9.5 million annual minimum purchase requirement in the EDA. Vantage may argue that this growth trajectory reflects an understanding between the parties that Vantage was servicing an expanding territory, and that such growth would not have been possible within the New England Territory alone. However, this argument is speculative and easily rebutted. The growth in Vantage's purchases is also consistent with increasing demand for Oncalaris® within the New England Territory — a specialty oncology product whose market is growing nationally. Moreover, Vantage's own financial summaries show that approximately $6.4 million of its FY 2021 revenue came from tri-state sales, meaning that even excluding the unauthorized tri-state revenue, Vantage's New England business was substantial and growing.
VIII. Expert discovery
The scheduling order entered by Judge Costigan does not establish a separate expert discovery deadline, as this case is primarily one of contract interpretation governed by the written terms of the EDA and applicable Massachusetts contract law. Neither party has designated expert witnesses to date, and we do not currently anticipate that expert testimony will be necessary for Penterra's affirmative case on the declaratory-judgment claim.
However, Vantage's counterclaims seek $35 million in damages, and it is possible that Vantage will designate a damages expert to support its damages theory. As noted in Section III.A above, Vantage has stated that its damages calculation is being developed with the assistance of Cranmer, Hodges & Associates, P.C., its outside accounting firm. If Vantage designates a damages expert — whether from Cranmer, Hodges & Associates or an independent economics or valuation expert — we should be prepared to take the following steps:
(a) Depose the expert promptly upon receipt of the expert report;
(b) Retain a rebuttal damages expert to evaluate and challenge Vantage's damages methodology, assumptions, and calculations; and
(c) File a Daubert or comparable motion to exclude the expert's testimony if the methodology is unreliable or the damages figure is speculative.
The $35 million damages claim will require close scrutiny regardless of whether it is supported by expert testimony. Given the approximately $6.4 million in actual tri-state revenues generated by Vantage over approximately six months, a $35 million damages figure appears to involve substantial extrapolation and projection that may be vulnerable to challenge.
Current Assessment. Expert discovery is unlikely to be needed if the case is resolved on summary judgment based on the contract language and Massachusetts law of contract interpretation. If the court denies summary judgment in whole or in part, expert discovery may become necessary, and we should plan accordingly at that time.
IX. Discovery Budget and Timing
Estimated discovery Costs to Date. The following categories of discovery-related costs have been incurred or are estimated as of the date of this memorandum:
• Deposition transcripts: Approximately $4,800 estimated for the Farnham and Kapoor deposition transcripts (final and rough copies, including videographer fees for the Farnham deposition).
• Document hosting and review platform costs: Ongoing costs associated with the relativity platform used for hosting, searching, reviewing, and producing documents in this matter. These costs are billed monthly and are within budgeted parameters.
• Travel expenses: Minimal travel expenses have been incurred, as all depositions to date have taken place in Boston.
Remaining discovery Expenditures. The following discovery-related expenditures are anticipated for the remainder of the discovery period:
• Depositions: Two additional depositions remain — the Mendez deposition on November 19, 2021, and the Kopec deposition on December 7, 2021. Transcript costs for these depositions are estimated at approximately $2,000–$2,500 per deposition, depending on length.
• Potential motion practice: If the privilege log dispute or the interrogatory dispute is not resolved through the meet-and-confer process, additional attorney time will be required to brief and argue a motion to compel (or to oppose Vantage's motion to compel). Estimated additional time: 15–25 hours of attorney time, depending on the complexity and number of motions.
• Witness preparation: Attorney time for preparation of Rachel Mendez and for preparation of the Kopec deposition outline and examination.