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$48M win for small company

A jury agrees with a struggling Pinellas Park business that its drug patent was fraudulently sold. The judgment could go higher.

By KRIS HUNDLEY
Published December 21, 2005

For years, John Lezdey and his sons have claimed their right to a potentially blockbuster new drug was stolen by an ex-business partner and illegally licensed to a California biotech.

In return, they've been accused of, but never charged with, such bizarre retaliatory behavior as sending tarantulas through the mail, throwing acid on cars and shooting out windows.

On Monday, a jury in federal court in Miami sided with the Lezdeys.

After three months of testimony and five days of deliberation, jurors found Arriva Pharmaceuticals Corp. of Alameda, Calif., and a private investigation firm it hired guilty of unfair competition, stealing trade secrets and interfering with the Lezdeys' business in Pinellas Park.

The jury awarded the Lezdeys' struggling AlphaMed Pharmaceutical Corp. a stunning $48-million in compensatory damages, making it among the highest nonpersonal injury awards of the year.

And the figure could go higher. The Lezdeys and their attorneys return to court early in January to argue for more punitive damages against Arriva and Spinelli Corp., the investigator in Scottsdale, Ariz.

"I'm going to go into court and slap a $20 bill down and tell the jury to start adding zeros," said James E. McDonald of Miami, who was the Lezdeys' co-counsel with Douglas Rovens of Los Angeles. "Arriva has been slamming the Lezdeys for six years, maligning, slandering and bankrupting them. The jury heard every lie and rejected them."

Calls seeking comment were not returned by Arriva or its lawyer in Florida.

Steve Eisenberg, attorney for Spinelli Corp., declined to comment, saying it would be inappropriate "until the judge has discharged the jury completely," which will happen once punitive damages are set.

Key to the jury's finding was its determination that Arriva's license to develop the protein alpha 1-Antitrypsin, or AAT, is fraudulent. That has broad implications for Arriva and its major investor, MPM Capital of Boston and San Francisco, and Baxter Healthcare Corp., which is an investor and co-developer of AAT with Arriva.

A spokeswoman for MPM, a $2-billion life sciences fund that is represented on Arriva's board, declined to comment.

Baxter, which is on Arriva's board, did not return a call requesting comment.

According to Arriva's Web site, Baxter and Arriva completed successful clinical trials in early 2004 for use of AAT in the treatment of emphysema. In the past, the company had estimated the value of the drug in the emphysema market at more than $4-billion.

Lezdey, a 74-year-old research chemist and patent lawyer, thinks AAT could be effective against everything from skin disorders to bird flu, raising its potential value to more than $10-billion.

Despite the finding in his favor in Miami, Lezdey said Tuesday he is not ready to celebrate.

"It's not over yet," said Lezdey, who worked for drug companies and law firms in New Jersey before moving to Florida in the late 1990s. "A lot of my technology has been stolen. Now it's for us to try to get it back."

Lezdey had teamed up in the mid 1980s with Allan Wachter, then a researcher at the University of Pennsylvania, to develop synthetic sources of AAT, a natural protein derived from blood plasma. Their work led to 17 patents involving uses or production of AAT. In 1997, Lezdey became president and majority shareholder of a company formed with Wachter and Lezdey's sons, Darren, now 41, and Jarett, now 39, to license AAT.

By early 1999, Wachter had licensed the patents to Arriva without the senior Lezdey's knowledge or approval. The three Lezdeys had been forced out of the deal.

"Since that license is invalid," said the Lezdeys' attorney McDonald, "the whole company (Arriva) is built on fraud."

McDonald said that is why Arriva and Wachter, who took an executive position with the company, went after the Lezdeys and their new company, AlphaMed, with a vengeance, slamming them with multiple lawsuits and accusing them of violent behavior. (Despite the allegations, no criminal charges have been filed against the Lezdeys.)

In late 1999, Arriva hired George Spinelli, a former FBI agent, to keep an eye on the Lezdeys, reportedly in response to death threats on Wachter.

Though Spinelli testified in court that his information on AlphaMed was legally obtained from the company's curbside trash container, McDonald argued the detective got confidential documents illegally. (On two occasions, the Lezdeys captured photos of late-night intruders in their office on hidden cameras.)

As a result of Spinelli's work, Arriva not only had highly privileged information about AlphaMed's legal and business strategies; Spinelli also was able to use his FBI contacts to pressure AlphaMed's sole investor into withdrawing his support from the company. AlphaMed's confidential discussions with potential partners were aborted because of Arriva's interference.

"Arriva knew the only way to safeguard the company was to destroy the Lezdeys," said McDonald, a former federal prosecutor and FBI agent. "It's a disgusting tale of human greed."

Though the Lezdeys have scored a major victory in Miami, related countersuits are pending. A breach of fiduciary duty case against John Lezdey is pending in state court in Arizona; a similar case against his sons resulted in a $17-million judgment that the two men say they are unable to pay.

Another suit and countersuit involving Arriva and the Lezdeys is pending in federal court in California. McDonald is hopeful the Miami jury's finding, invalidating Arriva's license, will effectively eliminate that case.

Lezdey, meanwhile, is relishing the fact that a jury finally listened to his complicated case and agreed with his claims.

"The money's not in the bank," he said. "But having a jury find in our favor - that's what's kept me going."

Kris Hundley can be reached at hundley@sptimes.com or 727 892-2996.

[Last modified December 21, 2005, 00:51:17]