BOSTON (Legal Newsline) - The Massachusetts Supreme Court has affirmed a multimillion-dollar verdict in favor of a cancer researcher who filed a lawsuit after Steward Health Care System cut the cord on her project.
The April 28 decision affirms a trial court's decision to reduce a $22 million jury award to $10.2 million and came close to requiring that the money be used to start a new cancer research center. However, only half of the justices agreed on that point, so the money will be paid to cancer researcher Lynn Hlatky without restrictions.
The ruling said Steward committed a breach of contract with Hlatky, as well as the contract’s implied covenant of good faith and fair dealing, when the health care system withdrew its support for Hlatky’s cancer research laboratory, causing the laboratory to close its operations.
Though the civil court jury’s awarded Hlatky more than $22 million in damages, Massachusetts Superior Court Justice Karen Green’s final decision essentially slashed that half.
The final decision was to reduce the award to $10.2 million — $10 million to reestablish a laboratory and $200,000 for Hlatky’s out-of-pocket expenses.
Green concluded the award of more than $22 million was not supported by the evidence presented at trial, and conditionally ordered a new trial on damages unless Hlatky accepted the $10.2 million.
“[The award for $22 million is] grossly disproportionate to the proven injury Hlatky suffered from the destruction of her life’s work,” Green said.
Hlatky moved for reconsideration, claiming there was evidence that the cost per year to operate a new laboratory was approximately $3.75 million and $4 million — a total of approximately $22 million for the six years she planned to continue research.
Steward also appealed on three principal claims that Green erred and abused her discretion, in that: Hlatky did not personally own any of the laboratory’s equipment or have an ownership interest in the federal grants the laboratory received to fund operations; in the absence of expert testimony or competent evidence as to the cost of re-establishing a laboratory, evidence was insufficient to support an award other than out-of-pocket mitigation costs; and prejudgment interest should have been the date Hlatky filed the complaint, not the date of the breach.
Six justices participated in the appeal, unanimously agreeing that trial evidence supported the finding that Steward, by withdrawing its promised support for the research laboratory, committed a breach of contract and implied covenant. They also found that the cost of re-establishing a cancer research laboratory was warranted through damages, as it would restore Hlatky to the position she would have had through Steward previously.
In 2005, Hlatky secured a research grant from NASA and moved her laboratory from the University of California - Berkeley to St. Elizabeth's Hospital, which was part of the Caritas Christi Hospital system (Caritas). Hlatky brought the NASA grant, her team members, equipment, reagents and cell samples generated through her research.
After moving to Caritas, Hlatky founded the Center of Cancer Systems Biology.
Steward acquired Caritas in November 2010. After the acquisition, Hlatky continued to manage the Center and work as the principal investigator without a contract from Steward for more than a year.
In February 2012, Hlatky and Steward agreed to a three-year contract, retroactive to October 1, 2011, renewable by mutual agreement, for Hlatky to continue to serve as the Center’s director.
The Steward Research and Specialty Project Corporation (SRSPC) was created, with which Hlatky entered into a contract.
In the fall of 2012, Steward transitioned away from benchtop research, the type being performed by the Center. That December, Steward resigned and withdrew as the sole member of SRSPC, which was renamed to GeneSys Research Institute (GeneSys).
GeneSys chose not to renew Hlatky’s contract, which ended September 30, 2014. In July 2015, GeneSys filed a petition for bankruptcy.
“The defendant's breach foreseeably resulted in the destruction of a researcher's life work. Although Hlatky has no ownership interest in the Center’s equipment or samples, which were funded by the taxpayers, she had an expectation interest in the continuation of the research program that she created, operated for twenty-five years, and helped fund by using talents and efforts to obtain federal grants,” Green said.
“The destruction of Hlatky's life work in cancer research resulted in damages personal to her that she may recover under Massachusetts contract law,” Green said.
Green denied Hlatky’s motion for reconsideration and Hlatky accepted the reduced award of $10.2 million, reserving her right to cross-appeal the decision.