The Aoki Diabetes Research Institute (ADRI) was a party in certain civil litigation filed in Nevada (Case No. CVO3-
At the request of ADRI and several other parties, on September 17, 2004, the Court issued an Injunction against Metabolic Treatment Centers, Inc.
A reformatted copy of the Order Granting Preliminary Injunction is shown below. We have attempted to quote it verbatim but this copy is not a substitute for the official court document.
” IN THE SECOND JUDICIAL DISTRICT COURT OF THE STATE OF NEVADA IN AND FOR THE COUNTY OF WASHOE
METABOLIC TREATMENT CENTERS, INC., a Nevada Corporation, Plaintiff,
METABOLIC INDUSTRIES, a Nevada Corporation, HAMILTON-
CASE NO. CV03-
DEPT. NO. B6
ORDER GRANTING PRELIMINARY INJUNCTION
Based upon the review and consideration of the evidence presented at the May 20 and 21, June 7, 8, 9, 10 and July 2, 2004 hearing regarding the parties’ cross motions for preliminary injunction, the pleadings and briefs of the parties, the Court’s notes from the hearing, the record before the Court and the Court’s legal research, the Court orally pronounced its findings with regard to the parties’ separate motions for preliminary injunction on July 2, 2004. Those findings of fact, conclusions of law and order are as follows:
I. RELEVANT PROCEDURAL HISTORY
On August 4, 2003, Plaintiff Metabolic Treatment Centers, Inc. (“MTC”) brought this action against Defendants Metabolic Industries (“MI”), Hamilton-
On August 12, 2003, attorney Robert Grayson filed an Answer purportedly on behalf of defendant ADRI. Additionally, Grayson filed a cross-
The MI Defendants answered MTC’s complaint on December 17, 2003. At the same time, and within the same document, MI and ADRI counterclaimed against MTC and initiated a cross-
Immediately after MTC opposed the motion for a temporary restraining order and preliminary injunction filed by MI and Dr. Aoki, MTC filed its own motion for preliminary injunction. On January 6, 2004, MTC replied to the MI Defendants’ counterclaim.
On January 15, 2004, Bionica filed a Motion to Dismiss or Stay Cross-
On February 5, 2004, MI and Dr. Aoki opposed Bionica’s Motion to Dismiss or Stay, to which Bionica replied on February 18, 2004. That motion, however, was not submitted to the Court for consideration until March 31, 2004.
In the interim, on February 6, 2004, MTC filed its Reply in support of its motion for preliminary injunction, and on February 10, 2004, this Court issued an Order: (1) requiring the parties to set the preliminary injunction motions for an evidentiary hearing; and (2) denying MI’s and Dr. Aoki’s request for temporary restraining order. As a consequence, an evidentiary hearing on the matter of the competing motions for preliminary injunction was set for Thursday, May 20, 2004 and, if necessary, Friday, May 21, 2004.
On March 16, 2004, MTC filed a voluntary dismissal of defendants Bionica and Gregory Gilbert, without prejudice. On April 5, 2004, the Court issued an Order granting Bionica’s Motion to Dismiss the cross-
On May 6, 2004, MI and Dr. Aoki moved for reconsideration of the Court’s April 5, 2004 Order granting Bionica’s Motion to Dismiss. Bionica filed its Opposition on May 25, 2004, and MI and Dr. Aoki filed their Reply and Request for Submission of the same on June 14, 2004. This motion was granted by Order of the Court entered July 21, 2004.
On May 19, 2004, immediately prior to the commencement of the evidentiary hearing on the parties’ separate motions for preliminary injunction, MTC filed its hearing brief and MI and Dr. Aoki filed a Motion to Strike all declarations filed by MTC in connection with its motion for preliminary injunction. The evidentiary hearing began on Thursday, May 20, 2004, continued on to Friday, May 21, 2004, and then June 7, 8, 9, and 10, 2004. At the hearing, testimonial and documentary evidence was received by the Court. Final arguments were scheduled to proceed on Friday, July 2, 2004. Prior to final arguments, however, MTC filed its Opposition to MI’s and Dr. Aoki’s Motion to Strike, to which MI and Dr. Aoki replied.
On July 2, 2004, the parties presented their final argument to the Court. At the conclusion of final arguments, the Court orally pronounced its findings of fact, conclusions of law, and order as follows:
II. FINDINGS OF FACT
1. Metabolic Activation Therapy (“MAT”) is a system of medical treatments and methods invented and developed by Defendant Thomas T. Aoki, M.D. (“Dr. Aoki”) to treat metabolic disorders, primarily including diabetes. MAT is a medical treatment for diabetes in cases where conventional forms of diabetic treatments have failed. Dr. Aoki developed MAT to be administered only by: (1) medical professionals who have received special training; or (2) by specially trained medical professionals under the supervision of trained medical physicians. As the inventor and developer of MAT, Dr. Aoki applied for and obtained patents for MAT, with certain patent applications still pending.
2. In September of 2001, Dr. Aoki granted a license to Metabolic Industries (“MI”) for the commercialization of MAT. That license authorized MI to market and sublicense treatment and related services of MAT, except with regard to Asia, and ADRI or ADRI licensed sites. Defendant Gregory Gilbert (“Mr. Gilbert”), with whom Dr. Aoki had a long and close professional relationship, was the President/CEO of MI. Mr. Gilbert was responsible for the financial development of the company, and Dr. Aoki for the professional medical aspects of the company.
3. Mr. Gilbert also owns Defendant Hamilton-
4. As of early Spring 2003, Mr. Gilbert had been removed and demoted from CEO/President of MI but remained as legal counsel and Board member of MI. Despite being removed as CEO/President and demoted, Mr. Gilbert had the ostensible or apparent authority to participate in and negotiate terms for financing and developing MAT. Mr. Gilbert and Dr. Aoki both knew that any agreement for the financing and development of Metabolic Activation Therapy was subject to and required approval by the Board of Directors of Metabolic Industries.
5. In early spring of 2003, Mr. Gilbert identified Mr. John Duffell (“Mr. Duffell”), who was apparently a person of means and able personally, or in cooperation with others,to fund the the tens of millions of dollars which would be necessary for this large and complex healthcare and business venture. Mr. Gilbert and Mr. Duffell spent a great deal of time, and also involved Mr. Max McCombs (“Mr. McCombs”), in discussing the project. Mr. Gilbert apparently never informed Mr. Duffell or Mr. McCombs, or anyone, nor did Mr. Gilbert ever represent to Mr. Duffell or Mr. McCombs, or anyone associated with Plaintiff Metabolic Treatment Centers (“MTC”), that he, Mr. Gilbert, lacked the authority to negotiate terms or that the agreement required approval by the Board of Directors of Metabolic Industries. However, Mr. Gilbert had the apparent or ostensible authority to represent MI in regard to the solicitation of capital and negotiation of potential agreements on behalf of MI.
6. On May 11, 2003, after two or three earlier versions of a Term Sheet were discussed, Mr. Gilbert, on behalf of MI, but without MI Board approval executed a Summary Memorandum of Terms for Stock Exchange and Marketing Agreement (“Term Sheet”). The Term Sheet discusses many aspects of a mutual enterprise contemplated by MI and MTC, and sets forth a number of intentions of MI and MTC with the understanding that a final “Definitive Agreement” would be executed at a later time once the parties agreed upon the final details.
This Term Sheet does not constitute an agreement of the parties. The Court adopts by reference the analysis of its various provisions as stated in the findings from the bench on July 2, 2004, set forth in Exhibit “A” to this Order.
7. MI reasonably refused to pursue the project envisioned in the Term Sheet because of concerns about financing the project and about Mr. Duffell’s background.
8. Subsequent to the termination of negotiations by MI, Bionica, through Mr. Gilbert, represented to MTC that it had the precise MAT licensing rights that MTC had sought from MI. As a result, MTC and Bionica entered into a Licensing Agreement dated July 25, 2003 (“Bionica-
III. CONCLUSIONS OF LAW
A. The Collaborative Licensing Agreement Between MI and Bionica (Exhibit 33):
1. The Collaborative Licensing Agreement between MI and Bionica (Exhibit 33) relates to the development and manufacturing of improved versions of the Bionica pump, or method for delivering insulin, as defined in the “Subject Technology” Section of that Agreement, and does not constitute a grant by MI to Bionica of authority for licensing or sublicensing of MAT.
2. The Collaborative Licensing Agreement between MI and Bionica (Exhibit 33) granted MI the exclusive right to purchase an improved pump developed by Bionica, which was to be used in the administration of MAT, and granted to Bionica the right to use its technology for the sole purpose of manufacturing the Bionica pump.
3. Dr. Aoki and MI did not breach the Collaborative License Agreement (Exhibit 33).
B. The May 11, 2003, Term Sheet (Exhibit 1):
1. Any agreements entered into by Dr. Aoki and/or MI prior to the May 11, 2003, Term Sheet (Exhibit 1) did not alienate Dr. Aoki’s control over the use and marketing of MAT, which he developed throughout his entire career.
2. The Term Sheet (Exhibit 1) is not an enforceable contract. Not only are most of its provisions too vague, general, and/or uncertain to render them enforceable, the document repeatedly refers to a subsequent “Definitive Agreement.” The Definitive Agreement would specify the terms of the Agreement once those terms were negotiated and determined. No Definitive Agreement was ever reached between the parties.
3. The statements and conduct of Dr. Aoki, counsel for Dr. Aoki, and counsel for Metabolic Industries in June and July of 2003 preclude enforcement of the Term Sheet (Exhibit 1) on the basis of the theory of promissory estoppel.
C. The July 25, 2003 Bionica-
1. MTC did not obtain MAT global licensing rights through the Bionica-
Based on the foregoing, it is hereby ORDERED:
1. Defendants Metabolic Industries’ and Dr. Thomas T. Aoki’s Motion for Preliminary Injunction is GRANTED.
2. Plaintiff Metabolic Treatment Centers, Inc.’s Motion for Preliminary Injunction is DENIED.
3. Plaintiff Metabolic Treatment Centers, its officers, agents, employees, and affiliates are hereby restrained and enjoined from any marketing, licensing or sublicensing activity relating to Metabolic Activation Therapy (“MAT”), or using MAT in any manner, except as set forth in this Order, as follows:
a. Plaintiff Metabolic Treatment Centers may, until further order of this court or any court of competent jurisdiction, continue to operate, for the sole purpose of continuing necessary medical treatment to patients of such clinics, operate, directly or indirectly through licensees, the following clinics, which Plaintiffs have asserted were in operation as of July 2, 2004:
Salt Lake City, Utah;
and Phoenix, Arizona
b. Additionally, each clinic shall adhere to the strict protocols developed and formulated by Dr. Aoki in whatever nature or form, in connection with the delivery of MAT to patients. Further, each clinic shall disclose fully in writing to MI and Dr. Aoki, all documents related to its establishment, operations, management and finances, including but not limited to all manuals used in the training of personnel in administering of MAT, any and all records prepared by the clinic in compliance with HIPPA, and any other document or information required by MI and Dr. Aoki in this regard.
c. MTC, through counsel, shall immediately, and in no event later than ten (10) days following service of this Order upon MTC’s counsel, disclose to counsel for the MI Defendants the contents of all licensing, sublicensing, and operating agreements of any nature, including employment agreements and copies of any written protocols for the delivery of any medical services, by which all eight(8) identified clinics operated and/or licensed by MTC or Bionica are being conducted.
d. The parties and their counsel shall not disclose to any third party the contents of the documents disclosed above (item c) any documents disclosed regarding MTC without the authority of this Court or a court of competent jurisdiction.
e. Until further order of this Court, MTC shall, through its counsel, beginning on the date of this Order, provide to counsel for the MI Defendants detailed accounting of all financial activities of the clinics including financial statements, at least once every three (3) months detailing the expenses and income of each clinic.
f. The MI Defendants were ordered to post a bond in the amount of $50,000.00, which was posted by the MI Defendants on August 24, 2004.