Zydus Worldwide DMCC v. Teva API Inc.

461 F.Supp.3d 119

ZYDUS WORLDWIDE DMCC, Plaintiff,

v.TEVA API INC., Defendant.

Civ. No. 19-17086 (KM) (JBC)

United States District Court, D. New Jersey.

Signed May 20, 2020

Joseph Nicholas Froehlich, Locke, Lord, LLP, New York, NY, for Plaintiff.

Liza M. Walsh, Gerhard William Buehning, Katelyn O'Reilly, William T. Walsh, Jr, Walsh Pizzi O'Reilly Falanga LLP, Newark, NJ, for Defendant.

KEVIN MCNULTY, U.S.D.J.:

Now pending before the Court is the motion (DE 17) of the defendant Teva API Inc. ("TAPI") to dismiss the Complaint (DE 1). Plaintiff Zydus Worldwide DMCC ("Zydus") brings suit, asserting that TAPI breached the parties’ binding Letter of Intent ("LOI"). The LOI is a contract by which TAPI undertook to supply Zydus with an active pharmaceutical ingredient, Form I rotigotine, which Zydus needed to manufacture and sell a generic form of a prescription drug called Neupro. TAPI now moves to dismiss the Complaint, asserting that the parties’ dispute is subject to a forum-selection provision in a separate agreement, an Asset Purchase Agreement ("APA") entered into between Zydus and TAPI's parent, Teva Pharmaceutical Industries Ltd. ("Teva"). Under the forum-selection clause in the APA, says TAPI, the parties are required to submit this dispute to a federal or state court in New York. TAPI therefore moves to dismiss the entire complaint. It also moves separately to dismiss the promissory estoppel claim in Count 3 for failure to state a claim.

For the reasons explained herein, I will grant in part and deny in part the motion to dismiss. For clarity, I have explicitly denied various other formal and informal requests to dismiss, stay, or transfer this action.

I. Summary¹

A. Rotigotine

Currently, a prescription medicine with the active ingredient rotigotine is sold in the U.S. under the brand name Neupro. (Compl. ¶ 9) Neupro is prescribed for the treatment of Parkinson's disease and moderate-to-severe primary restless leg syndrome. (Id. )

Generic forms of Neupro are also being developed. Premised on the new drug application ("NDA") for Neupro, No. 021829, TAPI's parent, Teva, developed a generic line of rotigotine products and filed an abbreviated new drug application ("ANDA"). (Id. ) Teva's ANDA "for the generic rotigotine pharmaceutical products ... specified that the products would be manufactured using Form I rotigotine manufactured by TAPI." (Id. ¶ 2)

B. Background to the Zydus and TAPI transaction

"On or about July 26, 2015, Teva announced that it would acquire the generic drug business of Allergan plc (‘Allergan’)." (Id. ¶ 11) However, the Federal Trade Commission ("FTC") raised antitrust objections to the potential acquisition. (Id. ) To neutralize those antitrust issues, Teva negotiated with the FTC to divest itself of certain assets, including Teva's "Rotigotine Product Assets." (Id. ¶¶ 11–12)²

Teva found a willing purchaser for those assets in Zydus. Teva agreed to divest its rotigotine products "by selling them to Zydus, which would own the associated ANDA and take over the eventual sale, following FDA approval, of the Rotigotine Products in the United States. Teva and Zydus entered into an Asset Purchase Agreement (the "APA"), dated as of June 16, 2016, under which Teva agreed to sell and assign Teva's Rotigotine Product Assets (including the Rotigotine ANDA) to Zydus." (Id. ¶ 13)

C. Zydus and TAPI enter into LOI for supply of Form I Rotigotine

Access to sufficient quantities of Form I rotigotine was necessary for Zydus to manufacture and sell generic rotigotine products, and to obtain FDA approval to do so. (Id. ¶ 14) On May 24, 2016, Zydus and TAPI entered into a binding LOI whereby TAPI committed to provide Form I rotigotine to Zydus. (Id. ¶ 15) Zydus asserts that this guaranteed supply commitment was a precondition to its agreement to purchase all of Teva's rotigotine related assets. (Id. )

"The LOI was executed between [TAPI] and [Zydus] and pertained to "the supply of the active pharmaceutical ingredient Rotigotine (collectively, the ‘API’)." (LOI, DE 17-3 at 233) The LOI acknowledged that this supply of the API was related to a transaction memorialized in a separate "Master Purchase Agreement" between Teva and Zydus, dating from 2015. The LOI did not, however, further specify or adopt by reference the terms of that Master Purchase Agreement. (Id. ) The LOI provided that it "represent[ed] a binding commitment with respect to the supply terms included herein"; however, it was subject to the negotiation of a definitive supply agreement between TAPI and Zydus. (Id. )

TAPI committed under the LOI to "negotiate in good faith the terms of the Definitive Agreement, pursuant to which Teva API shall supply the API on a non-exclusive basis to Zydus for use in the production of the Products and the sale by Zydus in the Territory of the Products during the Term (as defined below in Section 3)." (Id. at 234) Under the LOI, TAPI committed to supply "commercial quantities of Form I rotigotine at a price of $37,500/kg for the initial three-year term" with an option to extend the LOI for up to four more years. (Id. ¶ 16) The LOI "expressly stated that, notwithstanding the anticipated definitive agreement, ‘this LOI represents a binding commitment with respect to the supply terms included herein.’ " (Id. ¶ 17)

D. The Asset Purchase Agreement ("APA")³

As outlined above, a second agreement is at issue here: the APA "made by and between [Zydus], a company formed as per rules and regulations of Dubai Multi Commodities Center Authority ("Buyer"), and [Teva], an Israeli corporation, acting directly or through its Affiliates ("Teva" or "Seller")." (DE 17-3 at 120)

The APA provided:

WHEREAS, in order to resolve the concerns raised by the FTC staff in these alleged product markets in the United States, Teva has agreed to enter into this Agreement with Buyer to divest certain assets related to these products to Buyer, and to permit Buyer to replace the lost competition by manufacturing, marketing and selling the generic products referred to above into the respective alleged product markets.

(Id. ) "Product" was further defined in Exhibit C to mean "Rotigotine Transdermal Patch" and "Minocycline HCl CAP" in various strengths. (DE 17-3 at 169)

The APA contains provisions concerning "Supply Products." That term, however, is not defined so as to include any Rotigotine finished product, the Rotigotine active pharmaceutical ingredient, or Form I rotigotine. Rather, "Supply Products" are defined as "the generic pharmaceutical on-market Supply Products listed on Schedule 6.1 that are to be supplied by the Manufacturer to the Buyer hereunder." The products listed on Schedule 6.1 relate solely to certain capsules for a separate drug, Minocin. (DE 17-3 at 208) Schedule 6.1 does not mention Rotigotine.

The term "Transferred Assets" under the APA is defined as "the following assets of [Teva], as the same exist on the Closing Date that relate solely and exclusively to the Products (and for the avoidance of doubt, excluding the Excluded Assets):

(i) the Product ANDAs;

(ii) any correspondence with the FDA in Seller's possession or control with respect to the Product ANDAs;

(iii) annual and periodic reports relating to the Product ANDAs which have been filed by or on behalf of Seller with the FDA, and adverse event reports pertaining to the Products, in each case as are in Seller's possession or control;

(iv) the Product Scientific and Regulatory Material⁴ ;

(v) the Assigned Patents;

(vi) the Assigned Contracts;

(vii) the trademarks and tradenames owned by Seller set forth on Schedule 2.2(a)(vii); and

(viii) any other assets belonging to Seller that are required to be transferred pursuant to the Order."

(DE 17-3 at 127) Once again, the active pharmaceutical ingredient, Type I rotigotine, is not listed in the APA as a "Transferred Asset" Nor does the APA discuss the supply of rotigotine.

The APA then goes on to address the relationship between this contract and other contracts that may be at issue:

SECTION 5.10. Contracts to be Assumed; Customers

(a) Other than (i) the Assigned Contracts, (ii) any purchase orders or (iii) other Contracts with Customers there are no other material Contracts related to the Products.

(Id. at 133 (emphasis added)) Schedule 2.2(a)(vii) defines "Assigned Contracts": as "Rotigotine Transdermal Patch (Neupro ) (a) Manufacture and Supply Agreement, dated as of June 6, 2016, by and between Teva Pharmaceuticals USA, Inc. and Tapemark." (DE 17-3 at 215) The APA also has a clause whereby it acknowledges that the APA supersedes all agreements between the parties (that is, Teva and Zydus) and shall not confer rights on third parties:

SECTION 13.7. Entire Agreement; No Third-Party Beneficiaries

This Agreement and the Exhibits and Schedules hereto constitute the entire agreement and supersede all prior agreements and understandings, both written and oral (including any letter of intent, memorandum of understanding or term sheet), between or among the parties hereto with respect to the subject matter hereof. Except as specifically provided herein, this Agreement is not intended to confer upon any Person other than the parties hereto any rights or remedies hereunder.

(Id. at 154)

Finally, the APA contains governing-law and forum-selection provisions:

SECTION 13.8. Governing Law

This Agreement and any and all matters arising directly or indirectly herefrom shall be governed by and construed and enforced in accordance with the Laws of the State of New York U.S.A. applicable to agreements made and to be performed entirely in such State.

SECTION 13.9. Jurisdiction, Venue, Service of Process, Waiver Of Jury Trial

(a) Buyer and Seller agree to irrevocably submit to the exclusive jurisdiction of (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, U.S.A., for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated

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