EVMS sues foundation in dispute over payout
Published: January 8, 2005
Section: Local, page B1
Source: BILL SIZEMORE
© 2005- Landmark Communications Inc.
N ORFOLK - BY BILL SIZEMORE THE VIRGINIAN-PILOT


N ORFOLK - A long-simmering internal power struggle at Eastern Virginia Medical School boiled over into court Friday when the school sued a fund-raising foundation affiliated with its best-known division, the Jones Institute for Reproductive Medicine, home of the nation's first in-vitro fertilization clinic.

The immediate legal fight is over whether the school owes the Jones foundation a $1.9 million share of a recent payout from a pharmaceutical company for the patent rights to Seasonale, an innovative birth control pill developed at the institute.

There is more than that at stake, however. Ultimately the case could decide whether the Jones foundation is entitled to receive as much as $20 million in profits from inventions of scientists at the institute.

In taking the fight to court, EVMS President J. Sumner Bell and the school's Board of Visitors have pitted themselves against Bell's predecessor, Edward E. Brickell, and a billionaire New York real-estate tycoon, Howard P. Milstein, who chairs the Jones foundation board. Milstein has pledged to personally pay the foundation's legal bills.

The lawsuit is the latest chapter in a two-year-long tug-of-war between the school's central administration and the Jones Institute Foundation, an independent nonprofit entity created to support the work of the institute after it achieved worldwide renown in 1981 with the birth of the nation's first test-tube baby.

In late 2002 Bell began trying to merge the Jones foundation into EVMS' fund-raising operation, arguing that more centralized control would help the school move forward. The foundation resisted, protesting that Bell's overtures were undermining the institute's mission. The merger effort eventually was dropped.

What finally landed the two sides in court was the $19 million EVMS received in September from Barr Pharmaceuticals Inc. for the patent rights to Seasonale, an oral contraceptive that reduces women's menstrual cycles from 13 to four per year.

Seasonale, the first commercial application of EVMS research in the school's 31-year history, has become a leading seller for Barr.

It was developed by Gary Hodgen, the former scientific director of the Jones Institute who stepped down three years ago for health reasons.

The payout from Barr was a welcome windfall for a school that has been beset with troubles in recent years, including budget shortfalls, stagnant fund raising, administrative turmoil, declining faculty morale and dysfunctional relationships with local hospitals.

Now even that piece of good news has turned sour as the Seasonale payment sits unused, frozen by the dispute over how to divide it .

According to a patent policy adopted by the EVMS board in April 2000, net proceeds from the sale of inventions are to be divided three ways among EVMS, the inventor and the inventor's academic department.

After paying the school's expenses and Hodgen's share of the Seasonale payout, Bell said Friday, that formula would have left EVMS with $5.7 million to split with the department of obstetrics and gynecology, home of the Jones Institute.

But the Jones foundation countered that under a separate letter of agreement signed by Brickell three days before he left office in June 2000, it was entitled to one-third of that amount, or $1.9 million. Moreover, if the formula laid out in the Brickell agreement is allowed to stand, the Jones foundation could receive a total of $20 million as future royalty payments are received by the school.

Harry T. Lester, rector of the EVMS board, said Friday that EVMS had tried to resolve the matter by offering the Jones foundation a one-time $1.9 million payment if the foundation would agree to forgo any future payments.

The foundation rejected that offer and suggested taking the dispute to binding arbitration.

But "arbitration doesn't get us where we need to be," Lester said, because it wouldn't have addressed the long-term ramifications of the Brickell agreement.

So EVMS decided to let a judge sort it out.

The lawsuit filed Friday in Norfolk Circuit Court claims that the Brickell agreement is invalid for numerous reasons, among them that it is not a legal contract, violated the school's patent policy, was not approved by the Board of Visitors and exceeded the authority granted to EVMS under its state charter.

"We're saying to the court, 'We did the best we could, and we couldn't get there,' " Lester said. "We can't resolve the controversy."

Gregory N. Stillman, a Norfolk lawyer who represents the Jones foundation, said Friday the foundation believes the Brickell agreement is valid and enforceable.

Milstein, the Jones foundation chairman, is a New York banker and real-estate developer who made aborted attempts to buy the Washington Redskins and Cleveland Browns football teams in the 1990s. He became a benefactor of the Jones Institute after his wife received treatment there. In an interview Friday, he said he has given the institute more than $3 million.

"Under no circumstances will the Jones Institute be blackmailed or bullied into accepting less than it is entitled to receive," Milstein wrote in a Dec. 16 letter to Lester and the EVMS board.

Brickell, in a Dec. 12 letter to Lester, characterized the disputed 2000 document as "a simple agreement between cooperating partners ... to help insure over time the continuation of the scientific efforts of the Jones Institute, at that time the acknowledged brightest jewel in the EVMS crown."


* Reach Bill Sizemore at 446-2276 or bill.sizemore@pilotonline.com.