Background Information

In May of 1999 Sargon Enterprises, Inc., filed an action in the Los Angeles County Superior Court against the University of Southern California, and certain dental professors, alleging numerous breaches of a clinical trial agreement and related causes of action. The case was scheduled for trial on July 30, 2001.Contrary to the rumors that have been spread, it was Sargon Enterprises that had brought this action against the University of Southern California and certain faculty members.

After announcing the research results at the first USC International Symposium in Monte Carlo in April of 1998 (which was sponsored by Sargon), Sargon requested written reports to be produced by the principal investigator of the research, Dr. Winston Chee. These reports were required by the written contract between the two parties.

Since, the dental community was made aware of the research project from various lectures by the investigators, and enhanced by announcements made at the USC Periodontal Symposium and the Monte Carlo Symposium, Sargon was placed under tremendous pressure by the dental profession to produce written reports on the ongoing USC research. The reports were not provided as required by the clinical trial agreement.

At the request of the interim dean, Dr. Gerald Vale, Dr. Chee produced a summary which, although generally positive , was inadequate and in breach of the written contract which specifically required reports to be in "detailed customary clinical format." Since Sargon could not use this summary to satisfy the dental scientific community, Sargon insisted that Dr. Chee produce the proper reports that were required by the contract or face legal action. The University also refused to provide access to the patient records.

After exhausting all options, including complaints to Dean Gerald Vale, and Dr. Ralph Alman, chairman of the USC Dental School's Board of Councilors, Sargon was left with no option but to file a legal action in May of 1999.

In July of 1999, a second summary was produced that now was showing negative results such as "coronal radiolucencies" around some implants involved in the study. The July summary clearly showed that only six patients out of twenty-three had been examined since the first summary prepared in January of 1999. Strangely, the July summary indicated coronal radiolucencies in two patients who had not been examined since the January summary.

Because of questions concerning these reports, Sargon made a demand for production of the patient treatment records, as permitted by the contract. After the filing of the civil lawsuit, a set of records were produced which consisted of only partial records. Sargon continued its demand for production of all the original patient records, which were eventually produced.

After examination of the original patient records Sargon became suspicious of possible alterations of the patient charts. Sargon had these records examined by Speckin Forensic Laboratories, which among other tests, conducted an Ink Dating Analysis. These tests indicated that the patient records were altered.

It is our view that by disparagement of the Sargon Implant and breach of the clinical trial agreement, competing implant companies have been given the opportunity to develop their own claims of immediate loading. This has been furthered by Drs. Chee and Nowzari's efforts to destroy the reputation of the Sargon Implant through a "smear campaign."

At a meeting in January of 2001 the evidence against Drs. Chee, Nowzari and the University, including the Speckin patient record fraud report, was disclosed to the representatives of the University. The University was given sixty days to examine the evidence and research the viability of the Sargon implant by interviewing several Sargon implant users who are also on the USC Dental School faculty. USC was also invited to examine other research conducted on the Sargon implant, and was asked to comply with the Sargon demands.

While USC made a settlement proposal, their offer to settle fell far short of the actions needed to restore Sargon's reputation. Sargon is entitled to a monetary recovery for damages sustained as a result of USC's conduct as well as the possible recovery of punitive damages for tampering with patient records with the purpose of destroying the credibility of the Sargon implant.

This case arose because University of Southern California (USC) breached a clinical trial agreement for a revolutionary dental implant developed by Sargon Enterprises, Inc. (Sargon) by conducting the clinical study improperly and failing to timely provide Sargon the required 1-year interim reports. A unanimous jury awarded Sargon almost $500,000 in damages. But that resounding victory was rendered hollow by the trial court's flatly unsupportable pre-trial and post-trial rulings:

Prior to trial the court granted USC's motion in limine to exclude all evidence of Sargon's lost profits despite the fact that (a)everyone understood that Sargon would make commercial use of the study reports which could result in substantial profits and (b)USC was virtually a joint venturer in the promotion of this innovative implant.

The trial court refused to grant Sargon leave to amend to assert newly discovered tort claims that USC had altered study patient records and, coincidentally during the time it had "bungled" the study, had accepted a $300,000 contribution from one of Sargon's competitors. It did so despite the fact that there was nofirm trial date, trial did not even occur until 16 months after Sargon sought leave to amend, and any purported delay in asserting the new claims was relatively short and the result of ongoing settlement negotiations.

To add insult to injury, even though Sargon had prevailed on its contract claim and on USC's cross-complaint at trial, the trial court nevertheless found USC, not Sargon, the prevailing party for attorneys' fees under the contract and awarded USC $700,000, essentially nullifying the jury award.

Finally, the trial court improperly slashed Sargon's costs by more than half, bringing them just $1,800 below USC's section 998offer, and allowing the court to shift $51,000 of USC's costs onto Sargon.

These rulings were appealed by Sargon and the following was the Court of Appeal's Disposition:

In B167519 (consolidated with B169619): (1) the breach of contract judgment for plaintiff, from which USC does not appeal, is a final judgment; (2) we reverse the in limine ruling excluding evidence of lost profit damages and remand for a new trial on lost profit damages; (3) we reverse the order denying plaintiff leave to amend the complaint to include fraud allegations and remand for further proceedings; (4) we reverse the order awarding USC its attorney fees as the prevailing party under Civil Code section 1717; (5) we reverse the order awarding USC its costs under Code of Civil Procedure section 998; (6) we direct the trial court on remand to award plaintiff additional costs in accordance with the views stated in this opinion; and (7) we direct the trial court on remand to award plaintiff reasonable attorney fees as the prevailing party under Civil Code section 1717.

Plaintiff is awarded its costs on appeal.

In B163707, we reverse the judgment of dismissal and underlying orders sustaining the demurrer and striking the complaint. Plaintiff is awarded its costs on appeal.

USC Filed a petition to have the case reviewed by the California Supreme Court. This petition was denied on June 8, 2005.