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Top Adding - Irish v. Woods - Which Surety Was Left Holding the $500,000 Bag?
A secured lender’s primary source of recovery when a project goes bad usually is the loan collateral. Secondary sources could be the assets of a guarantor, a surety or an accommodation party, labels that often are used interchange
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
ably to describe a person who signed a loan document but who did not directly benefit from the loan. (See, March 23, 2007 post, Liability of Guarantors or Accommodation Parties when the Original Obligation Is Materially Altered.
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
The April 24, 2007 decision by the Indiana Court of Appeals in John T. Irish v. F. Lawrence Woods, 2007 Ind. App. LEXIS 786 addresses some general rules applicable to these secondary sources and also provides a good suretyship voca
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
bulary lesson.
Backdrop. Plaintiff Irish and defendant Woods formed LLC. Lender Old National Bank loaned LLC about $500,000. Both LLC and Irish were named borrowers on the note, but Irish did not directly benefit from the loan.
Backdrop. Plaintiff Irish and defendant Woods formed LLC. Lender Old National Bank loaned LLC about $500,000. Both LLC and Irish were named borrowers on the note, but Irish did not directly benefit from the loan.
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
Only LLC did. Woods guaranteed the note and, interestingly, also signed a separate guaranty of Irish’s debt under the note. LLC defaulted but evidently was judgment proof. Irish settled with Old National for the total amount d
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
ue by purchasing the note. Irish then sued Woods for the debt, claiming Woods was liable as the guarantor of the note. Irish also asserted a contribution claim against Woods based on the guaranty of Irish’s obligation under the n
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
ote.
7 things to know about Indiana suretyship law.
1. A borrower is a “principal obligor” – here, the LLC. Id. at 6.
2. When a party places a signature on a note solely for the benefit of another party, and without receiving a
7 things to know about Indiana suretyship law.
1. A borrower is a “principal obligor” – here, the LLC. Id. at 6.
2. When a party places a signature on a note solely for the benefit of another party, and without receiving a
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
y direct benefit, he or she is an “accommodation party” – here, Irish. Id.
3. An accommodation party is considered a “surety.” When the term surety refers to a person, it is a person who is liable for the payment of a debt, or p
3. An accommodation party is considered a “surety.” When the term surety refers to a person, it is a person who is liable for the payment of a debt, or p
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
erformance of a duty, of another person. Id. (The words “guaranty” and “guarantor” are synonyms for “suretyship” and “surety.” Id. at 7, n.4.)
4. The liability of an accommodation party only is relevant in the event of a defaul
4. The liability of an accommodation party only is relevant in the event of a defaul
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
t by the accommodated party. Ind. Code § 26-1-3.1-419(e). In such event, the accommodation party’s suretyship status allows him to seek reimbursement from the accommodated party. As a party with recourse against another party, t
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
he accommodation party’s suretyship status is equivalent to that of a “secondary obligor.” Id.
5. A “cosuretyship” occurs when two secondary obligors agree that, as between themselves, each should perform part of its secondary ob
5. A “cosuretyship” occurs when two secondary obligors agree that, as between themselves, each should perform part of its secondary ob
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
ligation or bear part of the cost of performance. The test of cosuretyship is a common liability for the same debt or burden. Id. at 8-9.
6. A “subsuretyship” occurs if two secondary obligors agree that, as between themselves, o
6. A “subsuretyship” occurs if two secondary obligors agree that, as between themselves, o
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
ne (the ‘principal surety’ – here, Irish) rather than the other (the ‘subsurety’ – here, Woods) should perform or bear the cost of performance. Id. at 9.
7. Whether a particular party is a cosurety with, or a subsurety to, anothe
7. Whether a particular party is a cosurety with, or a subsurety to, anothe
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
r party affects rights of contribution. The right of contribution operates to make those who assume a common burden bear it in equal proportions. In a cosuretyship, one cosurety is entitled to contribution from the other cosureti
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
s so that all cosureties bear the burden in equal, or otherwise agreed to, proportions. With regard to subsuretyships, if the principal surety performs on the obligation, it is not entitled to contribution from a subsurety. But,
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
if the subsurety performs on the principal obligation, the subsurety is entitled to reimbursement from the principal surety. Id.
The upshot. The lender, Old National, was well-served by having Irish co-sign the note. Even thoug
The upshot. The lender, Old National, was well-served by having Irish co-sign the note. Even thoug
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
h the direct beneficiary of the loan (the LLC) defaulted, Old National evidently still recovered the debt from Irish, an accommodation party. There was no need for Old National to pursue the guarantor, Woods. Because Irish anted
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
up, Woods got off scot-free.
Irish, as principal surety, “purchased” the note for the amount of his liability and then sought to enforce the guaranty of Woods, the subsurety. But a principal surety cannot “purchase” his own debt
Irish, as principal surety, “purchased” the note for the amount of his liability and then sought to enforce the guaranty of Woods, the subsurety. But a principal surety cannot “purchase” his own debt
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
and unilaterally create liability for a subsurety, who would not otherwise be liable. Id. at 13. The Court also determined that Woods, as guarantor of the note, only was secondarily liable. Irish, as principal surety, was primar
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
ily liable for the cost of performance on the note. In other words, in what may have been a close call for the Court, the judges ruled that the note’s co-signor (Irish) was on the hook but that the note’s guarantor (Woods) was not
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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