582 F.Supp.3d 167
S.D.N.Y.2022Background
- Bionpharma, a generic drug company, contracted with CoreRx in November 2020 under a Master Manufacturing Supply Agreement for CoreRx to manufacture and supply Bionpharma’s enalapril maleate oral solution (generic for Epaned).
- The Agreement required CoreRx to accept firm orders, allowed only Bionpharma to cancel or defer orders, included a Supply Interruption clause (§5.11), and left the annual Transfer Price to be set by mutual agreement one month before the fiscal year.
- Bionpharma faced patent litigation from Silvergate/Azurity; litigation against Bionpharma largely failed and some actions against CoreRx were filed then dismissed; Bionpharma offered indemnity to CoreRx for IP claims per the Agreement.
- In November 2021 CoreRx demanded a large price increase; after Bionpharma refused, CoreRx notified Bionpharma (Dec. 1) that it could not supply enalapril and then refused to deliver the balance of the December order and a Dec. 3 order.
- Bionpharma sued and moved for a preliminary injunction (seeking ~18,000 bottles), arguing imminent, irreparable reputational and public-health harm; the court granted the injunction, ordered mediation under the contract, and stayed the case pending mediation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Preliminary injunction standard (heightened vs. ordinary) | PI seeks preservation of contractual status quo; ordinary PI standard applies (or in any event plaintiff meets heightened standard) | Injunction would be mandatory/alter status quo, requiring heightened standard | Court: injunction is prohibitory (preserves contractually required status quo); heightened standard not required, but plaintiff met it anyway |
| Irreparable harm | Sudden loss of sole supplier will cause reputational harm, lost customers, inability to fulfill contracts, and patient/public harm—monetary damages inadequate | Limitation-of-liability clause bars consequential damages; harms are speculative | Court: irreparable harm shown—loss of goodwill and inability to timely replace supplier are difficult to value; PI appropriate |
| Contract validity re: patent preemption/illegality | Agreement valid; no court has held product infringes; Lear does not void such contracts | Enforcing the contract would violate federal patent law and be preempted; Lear supports nonenforcement | Court: contract not void; Lear does not support blanket invalidation of such contracts; no legal bar shown to enforcement |
| Applicability of §5.11 (Supply Interruption) | CoreRx has not shown inability to supply as §5.11 requires; its interruption claim arose only after price dispute | CoreRx complied with §5.11 and properly ceased supply due to interruption/settlement concerns | Court: CoreRx failed to demonstrate an actual inability to supply under §5.11; clause does not excuse refusal to perform |
| Transfer Price dispute — failure to agree on price | Failure to reach a new annual price does not terminate supply obligations; UCC supplies a reasonable-price remedy | Lack of mutual price agreement meant no supply obligation for the new period | Court: disagreement over price did not relieve CoreRx; UCC and contract interpretation require continued performance at reasonable price |
| Balance of equities & public interest | Continuing supply protects patients (esp. children), insurer access, and Bionpharma’s goodwill; Bionpharma contracted to indemnify CoreRx for IP costs | CoreRx risks large liability to Azurity and possible insolvency if forced to continue; public interest in patent enforcement | Court: equities and public interest favor Bionpharma; indemnity provision and public-health impacts outweigh speculative patent-enforcement harms |
Key Cases Cited
- New York ex rel. Schneiderman v. Actavis PLC, 787 F.3d 638 (2d Cir. 2015) (preliminary injunction standard and heightened-standard framework)
- Johnson v. Kay, 860 F.2d 529 (2d Cir. 1988) (distinguishing mandatory vs. prohibitory injunctions)
- Blumenthal v. Merrill Lynch, Pierce, Fenner & Smith, 910 F.2d 1049 (2d Cir. 1990) (injunctions to preserve status quo pending arbitration/alternative dispute resolution)
- Register.com, Inc. v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004) (loss of goodwill and customer relationships as irreparable harm)
- Reuters Ltd. v. United Press Int'l, Inc., 903 F.2d 904 (2d Cir. 1990) (importance of imminent irreparable harm in PI analysis)
- Lear v. Adkins, 395 U.S. 653 (1969) (licensee estoppel and patent-policy limits on contract enforcement — discussed and distinguished)
- Angiotech Pharms. (US), Inc. v. Rex Medical L.P., 754 F. Supp. 2d 616 (S.D.N.Y. 2010) (injunctive relief to preserve status quo pending ADR in supply cases)
- John B. Hull, Inc. v. Waterbury Petroleum Prods., Inc., 588 F.2d 24 (2d Cir. 1978) (injury to goodwill from termination of unique product supply)