Quarterly report pursuant to Section 13 or 15(d)

Note 11 - Commitments and Contingencies

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Note 11 - Commitments and Contingencies
3 Months Ended
Mar. 31, 2018
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]
1
1
.
Commitments and Contingencies
 
We are subject to legal proceedings and claims that arise in the ordinary course of business.
 
Sinotau Litigation –
NAV4694
 
On
August 31, 2015,
Sinotau filed a suit for damages, specific performance, and injunctive relief against the Company in the U.S. District Court for the District of Massachusetts alleging breach of a letter of intent for licensing to Sinotau of the Company’s
NAV4694
product candidate and technology. In
September 2016,
the Court denied the Company’s motion to dismiss. The Company filed its answer to the complaint and the parties have filed multiple joint motions to stay the case pending settlement discussion, which to date have been granted.
 
In
October 2017,
the Company executed a letter of intent with Sinotau and Cerveau Technologies, Inc. (“Cerveau”), outlining a plan to sublicense to Cerveau the worldwide rights to conduct research using
NAV4694,
as well as grant to Cerveau an exclusive license for the development, marketing and commercialization of
NAV4694
in Australia, Canada, China and Singapore. The letter of intent included a provision stating that Sinotau will release all claims in the Sinotau Litigation upon the parties’ execution of a definitive agreement; the commercial rights agreement contemplated by the letter of intent would also include a release of such claims and a covenant
not
to sue on such claims.
 
In
April 2018,
the Company executed an agreement to provide Meilleur Technologies, Inc., (“Meilleur”), a wholly-owned subsidiary of Cerveau, worldwide rights to conduct research using
NAV4694,
as well as an exclusive license for the development and commercialization of
NAV4694
in Australia, Canada, China, and Singapore. Meilleur also has an option to commercialize worldwide. As a result of the agreement, Navidea expects that the litigation initiated by Sinotau will be dismissed.
 
CRG Litigation
 
As disclosed in the Company’s Annual Report on Form
10
-K and other filings, the Company has been engaged in ongoing litigation with CRG, in its capacity as a lender and as control agent for other affiliated lenders party to the CRG Loan Agreement, in the Texas Court relating to CRG’s claims of default under the terms the CRG Loan Agreement. Following a trial in
December 2017,
the Texas Court ruled that the Company’s total obligation to CRG is in excess of
$66.0
million, limited to
$66.0
million under the parties’ Global Settlement Agreement reached in
2017.
The Texas Court acknowledged only the
$59.0
million payment made in
March 2017,
concluding that the Company owed CRG another
$7.0
million, however the Texas Court did
not
expressly take the Company’s
June 2016
payment of
$4.1
million into account and awarded, as part of the
$66.0
million, amounts that had already been paid as part of the
$4.1
million. The Company believes that this
$4.1
 million should be credited against the
$7.0
million; CRG disagrees.
 
On
January 16, 2018,
the Company filed an emergency motion to set supersedeas bond and to modify judgment, describing the double recovery created by the
$66.0
million award without taking into account the
$4.1
million payment in
June 2016,
requesting that the judgment be modified to set the supersedeas amount at
$2.9
million so that the Company could stay enforcement of the judgment pending appeal. The Texas Court refused to rule on this motion, and the court of appeals entered an order compelling the Texas Court to set a supersedeas amount. On
March 26, 2018,
the Texas Court ordered the Company to put up a supersedeas bond in the amount of
$7.7
 million. The Company filed for an emergency stay of the order in the appellate court in Harris County. On
April 2, 2018,
the appellate court denied the Company’s emergency stay motion. The Company continues to believe that the
$4.1
million paid to CRG in
June 2016
should be credited as payment toward the
$66.0
million total, and the Company intends to further contest the matter through the appellate court in Texas.
 
On
April 9, 2018,
CRG drew approximately
$7.1
million on the letter of credit. This was in addition to the
$4.1
million and the
$59.0
million that Navidea had previously paid to CRG.
 
On
April 12, 2018
Navidea filed suit in the Ohio Court against the Lenders.  The suit asserts that the Lenders fraudulently induced Navidea to enter into a settlement agreement and breached the terms of the same through certain actions taken by the Lenders in connection with the Global Settlement Agreement reached in
2017,
pursuant to which Navidea agreed to pay up to
$66.0
million to Lenders, as well as through actions and misrepresentations by CRG after the Global Settlement Agreement was executed.  The suit also asserts claims for conversion and unjust enrichment against the Lenders for their collection of more than
$66.0
million, the maximum permitted under the Global Settlement Agreement, and their double recovery of amounts paid as part of the
$4.1
million paid in
June 2016
and recovered again as part of the
$66.0
million. CRG’s double recovery and recovery of more than
$66.0
million are due to CRG drawing the entire
$7.1
million on the Cardinal Health
414
letter of credit. To date,
no
answer or other response or motion has been filed by the Lenders to Navidea’s complaint.
 
In a related proceeding before the Ohio Court, initially filed in
2016,
and under which the Global Settlement Agreement was reached in
2017,
the Ohio Court has issued preliminary findings that the settlement gave rise to a
$66.0
million cap on amounts owed to Lenders by Navidea and that Navidea might
not
have been properly credited for certain funds in excess of
$4.1
million previously swept by Lenders from a bank account owned by Navidea.  The Ohio Court also made a preliminary ruling that it possessed jurisdiction to interpret the settlement agreement at issue. The Company intends to pursue recovery of the
$4.1
million, and other damages, in the Ohio Court.
 
On
April 11, 2018,
CRG filed a new suit against the Company in the Texas Court. This new suit seeks a declaratory judgment that CRG did
not
breach the Global Settlement Agreement by drawing approximately
$7.1
million on the Cardinal Health
414
letter of credit. On
April 16, 2018,
CRG moved the Texas Court to issue an anti-suit injunction barring the Company from litigating in the Ohio Court. The Texas Court denied that motion on
April 27, 2018.
CRG served the Company with the new Texas suit on
May 2, 2018,
and the Company’s answer is due on
May 21, 2018.
The Company intends to contest this issue in the Ohio Court, the Texas Court, and on appeal in Texas. See Notes
2,
9
and
17
(b).
 
Sinotau Litigation –
Tc99m
Tilmanocept
 
On
February 1, 2017,
Navidea filed suit against Sinotau in the U.S. District Court for the Southern District of Ohio. The Company's complaint included claims seeking a declaration of the rights and obligations of the parties to an agreement regarding rights for the
Tc99m
tilmanocept product in China and other claims. The complaint sought a temporary restraining order (“TRO”) and preliminary injunction to prevent Sinotau from interfering with the Company’s Asset Sale to Cardinal Health
414.
On
February 3, 2017,
the Court granted the TRO and extended it until
March 6, 2017.
The Asset Sale closed on
March 3, 2017.
On
March 6,
the Court dissolved the TRO as moot. Sinotau also filed a suit against the Company and Cardinal Health
414
in the U.S. District Court for the District of Delaware on
February 2, 2017.
On
July 12, 2017,
the District of Delaware case was transferred to the Southern District of Ohio. On
July 27, 2017
the Ohio Court determined that both cases in the Southern District of Ohio are related and the case was stayed for
60
days pending settlement discussions. On
February 8, 2018,
Navidea and Sinotau executed an amendment to the agreement, modifying certain terms of the agreement and effectively resolving the legal dispute. On
February 17, 2018,
Navidea and Sinotau executed a Settlement Agreement and Mutual Release, and on
February 20, 2018,
Navidea and Sinotau voluntarily dismissed their legal cases.
 
Platinum-Montaur Life Sciences LLC
 
On
November 2, 2017,
Platinum-Montaur commenced an action against the Company in the Supreme Court of the State of New York, County of New York, seeking damages of approximately
$1.9
million purportedly due as of
March 3, 2017,
plus interest accruing thereafter. The claims asserted are for breach of contract and unjust enrichment in connection with funds received by the Company under the Platinum Loan Agreement. Said action was removed to the United States District of New York on
December 6, 2017.
An initial pretrial conference was held on
January 26, 2018.
At the conference the Court stayed the deadline for the Company to answer or otherwise respond to the complaint. The Court also directed the parties to engage in informal jurisdictional discovery and a follow up status conference was held on
March 9, 2018,
during which the Court set a briefing schedule and determined that Navidea’s motion to dismiss was due on
April 6, 2018.
The Company filed its motion to dismiss in advance of the filing deadline. A settlement conference was held on
April 30, 2018
and attended by a representative of Navidea and counsel, Dr. Goldberg and counsel, and counsel for PPVA and PPCO.  PPCO requested participation in the conference due to certain recent issues that have arisen concerning potential liability of PPCO to Navidea under the release and indemnification provisions of the payoff letter issued by PPCO in connection with the payment PPCO has received under the Platinum Loan Agreement.  The settlement conference resulted in
no
agreement. Because the funds sought by Platinum-Montaur are subject to claims of competing ownership, the Company intends to continue to defend itself in the action.
 
In accordance with ASC Topic
450,
Contingencies
, we make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Although the outcome of any litigation is uncertain, in our opinion, the amount of ultimate liability, if any, with respect to these actions, other than the CRG litigation for which we have accrued a contingent liability, will
not
materially affect our financial position.