C.R. Bard, Inc. v. Atrium Med. Corp.

C. R. Bard, Inc., Plaintiff/Counterdefendant, v. Atrium Medical Corporation, Defendant/Counterclaimant.

No. CV-21-00284-PHX-DGC

United States District Court, D. Arizona

April 18, 2022

ORDER

David G. Campbell, Senior United States District Judge.

Plaintiff C. R. Bard, Inc. (“Bard”) asserts breach of contract and related claims against Defendant Atrium Medical Corporation (“Atrium”). See Docs. 1, 37 53. Atrium moves to dismiss Bard's second amended complaint for failure to state a claim for relief. Docs. 53 61. Bard moves to dismiss Atrium's amended counterclaims as time barred. Docs. 57, 63. The motions are fully briefed (Docs. 65, 68, 69, 71, 74), and oral argument will not aid the Court's decision. See LRCiv 7.2(f). For reasons stated below, the Court will deny each motion.

I. Background.

In August 2010, Bard's wholly-owned subsidiary, Bard Peripheral Vascular (“BPV”), filed suit against Atrium alleging infringement of U.S. Patent 6, 435, 135 (“'135 Patent”). See BPV, Inc. v. Atrium Med. Corp., No. 2:10-cv-01694-PHX-DGC (D. Ariz. Aug. 10, 2010). In January 2011, Bard and Atrium entered into a Settlement Agreement and a Licensing Agreement. See Docs. 61-2, 61-3.

Under those Agreements, BPV's infringement claim against Atrium was dismissed and Atrium was granted a license to the '135 Patent and all other patents that rely on the '135 Patent (“Licensed Patents”). See Docs. 61-2 § 2(c), 61-3 § 2.1. Atrium agreed in the License Agreement to pay royalties to Bard in an amount equal to 15% of net sales of licensed products or a minimum of $3.75 million quarterly. See Doc. 61-3 §§ 3.1, 3.2. The License Agreement remains in effect until the last of the Licensed Patents expires. See Id. §§ 1.15, 7.1. Bard claims that Canadian Patent 1, 341, 519 (“Canadian Patent”) is a Licensed Patent and the Agreement is effective until January 2, 2024 - the date on which the Canadian Patent expires. See Doc. 53 ¶¶ 15, 22-23, 31.

The '135 Patent expired on August 20, 2019. See Doc. 53 ¶ 24. Thereafter, Atrium made royalty payments to Bard totaling 15% of its net profits on licensed products at amounts significantly lower than the $3.75 million due each quarter under the minimum royalties provision. See id.; 61-3 § 3.2.^[1] Atrium claims that the License Agreement ended when the '135 Patent expired. Doc. 61 at 6.^[2] Bard alleges that Atrium's failure to make minimum royalty payments after the '135 Patent expired constitutes a breach of the Agreements. Doc. 53 ¶¶ 26, 53, 83. Atrium counters that no royalty payments were owed to Bard after the '135 Patent expired because BPV - not Bard - owns the Canadian Patent. See Docs. 44 at 4, 61 at 6, 20.

Bard's first amended complaint asserts claims for breach of contract (Counts I-V), declaratory judgment (Count VI), specific performance (Count VII), promissory estoppel (Count VIII), and quantum meruit (Count XII). Doc. 37 ¶¶ 51-111, 115-19.^[3] A hearing was held on December 20 to discuss a possible motion for sanctions against Bard under Rule 11 of the Federal Rules of Civil Procedure. See Doc. 54. Atrium claimed that Bard falsely states in paragraph eight of the complaint that it owns the Canadian Patent. Doc. 59 at 4-5. Bard argued that this statement is not false because Bard owns BPV and its assets, including the Canadian Patent. Id. at 14-15. Bard offered to resolve the dispute by amending paragraph eight to make clear that it owns the Canadian Patent “through its wholly-owned subsidiary [BPV].” Id. at 16.^[4] The Court found that a Rule 11 motion was not appropriate and that Bard should simply amend the complaint. Doc. 59 at 25-27.

Bard filed the second amended complaint on December 21. Doc. 53. A week later, Atrium filed amended counterclaims for breach of contract, unjust enrichment, fraudulent inducement, and negligent misrepresentation. Doc. 57.

II. Atrium's Motion to Dismiss Bard's Second Amended Complaint.

As noted, minimum royalties are owed under the License Agreement until the expiration of all Licensed Patents. Doc. 61-3 §§ 3.2, 7.1. Licensed Patents include the '135 Patent and “all other patents of [Bard]” that rely on the '135 Patent. Id. § 1.15. While the '135 patent expired in August 2019, the Canadian Patent - which relies on the '135 Patent - remains valid until January 2024. See Docs. 44 at 2, 53 ¶¶ 8, 23-24, 31.

Bard alleges in Count I that Atrium has breached the License Agreement by failing to make minimum royalty payments after the '135 Patent expired. Doc. 53 ¶¶ 22-29, 51-55. Atrium contends that Bard does not own the Canadian Patent and it therefore is not a Licensed Patent under the Agreement. Doc. 61 at 14-16. Atrium moves to dismiss Count I and all remaining claims for failure to state a claim for relief. See id. at 11-17.

A. Rule 12(b)(6) Standard.

Under Rule 12(b)(6), the well-pled factual allegations of the complaint are taken as true and construed in the light most favorable to the plaintiff. See Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). A complaint that sets forth a cognizable legal theory will survive a motion to dismiss if it contains “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. Although the plausibility standard requires “more than a sheer possibility that a defendant has acted unlawfully[, ]” it “is not akin to a ‘probability requirement[.]'” Id. (citing Twombly, 550 U.S. at 556).

B. Bard Has Pled a Plausible Breach of Contract Claim.

The parties agree that Delaware law governs Bard's breach of contract claims. See Docs. 53 ¶ 13, 61 at 7, 61-2 § 14, 61-3 § 8.5. “The elements of a breach of contract under Delaware law are: ‘(1) a contractual obligation; (2) a breach of the obligation by the defendant; and (3) a resulting damage to the plaintiff.'” Miller v. Trimont Glob. Real Est. Advisors LLC, No. CV 21-49-MAK, 2022 WL 610820, at *4 (D. Del. Feb. 28, 2022) (quoting H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del. Ch. 2003)); see also VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003) (explaining that the plaintiff must allege these three elements “to survive a motion to dismiss for failure to state a breach of contract claim”).

Bard alleges that the License Agreement constitutes a valid and enforceable contract between Bard and Atrium, the Canadian Patent is a Licensed Patent under the Agreement, and Atrium has an obligation under the Agreement to make minimum royalty payments of $3.75 million each quarter until the Canadian Patent expires. Doc. 53 ¶¶ 15, 17, 22-23, 52; see also Doc. 61-3 §§ 1.15, 3.2. Bard further alleges that Atrium has breached that obligation by refusing to make minimum royalty payments. Doc. 53 ¶¶ 24-26, 53. And Bard claims that it has been damaged by Atrium's breach in an amount not less than $27 million. Id. ¶¶ 27-29, 54. The Court finds that Bard has pled each element of a breach of contract claim under Delaware law. See Doc. 35 at 4 (reaching the same conclusion in denying Atrium's initial motion to dismiss); Murdock v. Omega Fin., LLC, No. 7:20-CV-00508-RDP, 2020 WL 3791878, at *3 (N.D. Ala. July 7, 2020) (finding that the plaintiff stated a breach of contract claim under Delaware law by alleging that the parties' stock purchase agreement constitutes a contractual obligation, the defendant breached the obligation by failing to pay an indemnity holdback amount, and the breach damaged the plaintiff in the amount of $458, 000); Johnson v. GEICO Cas. Co., 516 F.Supp.2d 351, 357-58 (D. Del. 2007) (finding that the plaintiffs had “sufficiently pled the requirements for a breach of contract claim so as to withstand dismissal” by alleging that they entered into insurance contracts with the defendants, personal injury coverage provided in those contracts was denied, and the plaintiffs were harmed by these breaches).

Atrium notes that while a complaint's factual allegations need not be detailed, surviving a Rule 12(b)(6) motion “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Doc. 61 at 12 (quoting Twombly, 550 U.S. at 555); see also Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”). But the complaint does not merely recite the elements of a breach of contract claim. It contains detailed factual allegations that are “enough to raise a right to relief above the speculative level[.]” Twombly, 550 U.S. at 555. Specifically, the complaint alleges that BPV is Bard's wholly-owned subsidiary, that Bard owns the Canadian Patent through BPV, that the Canadian Patent is within the scope of the License Agreement, and that Atrium has breached the Agreement and damaged Bard by failing to pay minimum royalties. Doc. 53 ¶¶ 1, 8, 15, 22-23, 25-29. These factual allegations “possess enough heft to ‘show that [Bard] is entitled to relief.'” Twombly, 550 U.S. at 557 (quoting Fed.R.Civ.P. 8(a)(2)).

Atrium's contention that the breach of contract claim is not plausible lacks merit. See Doc. 61 at 16-20 The terms of the Settlement Agreement and the License Agreement suggest that Bard exercised its ownership control over BPV to grant a license to the Licensed Patents, and Atrium understood that fact. See Doc. 63 at 7. After the Agreements had been executed, Bard caused BPV to dismiss the patent infringement claim against Atrium, and Atrium began using the technology covered by the...