671 B.R. 783
Bankr. D.N.J.2025Background
- Invitae Corporation sold certain digital health assets to Natera, Inc. under a pre-petition Asset Purchase Agreement (APA), which included a contingent “Milestone Payment” subject to post-closing calculations.
- Invitae filed for Chapter 11 bankruptcy shortly after the APA’s execution. The status and timing of Natera’s Milestone Payment obligation became disputed, especially in light of Invitae’s bankruptcy plan.
- Both parties reserved the right to litigate remaining contract disputes related to the APA, specifically the Milestone Payment, in state court under the confirmed bankruptcy plan.
- While Invitae commenced a Delaware state action seeking declaratory relief as to the Milestone Payment, Natera filed a separate adversary action in bankruptcy court, seeking a declaration that Invitae’s plan-related rejection of the APA excused it from further performance, including the payment.
- The bankruptcy court denied Invitae’s motion to dismiss on jurisdictional grounds, but chose to abstain from hearing the case in favor of the parallel Delaware court proceeding, dismissing Natera’s adversary complaint.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does APA rejection absolve Natera of Milestone Payment liability? | Rejection of APA relieved Natera from any payment or performance obligations under the contract. | Debtors reserved all rights to pursue claims under the APA even after its rejection per bankruptcy plan. | Denied dismissal; controversy exists but contract interpretation more appropriate for state court. |
| Should the bankruptcy court issue declaratory/injunctive relief? | Natera is entitled to relief declaring its non-liability and enjoining Delaware action. | State court is the intended and agreed-upon forum for resolving post-rejection rights. | Court abstains, invoking its discretion under the Declaratory Judgment Act; state court to decide. |
| Does estoppel prevent either party from contesting jurisdiction or liability? | Debtors are estopped from pursuing post-rejection claims, having rejected the contract. | Natera is quasi-estopped from changing positions after having agreed to litigate contract interpretation in Delaware. | Court applies quasi-estoppel to preclude Natera from blocking state court litigation. |
| Is absence of subject matter jurisdiction grounds for immediate dismissal? | No issue raised; controversy is live due to the pending Delaware action. | No objection; justiciable controversy exists. | Jurisdiction exists but court declines to exercise it. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (standard for plausibility at motion to dismiss)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (further explanation of plausibility pleading standard)
- MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) (requirements for a justiciable declaratory judgment action)
- Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996) (courts' discretion in abstaining from certain federal jurisdiction cases)
- Wilton v. Seven Falls Co., 515 U.S. 277 (1995) (broad discretion under the Declaratory Judgment Act to abstain)
- Leamer v. Fauver, 288 F.3d 532 (3d Cir. 2002) (motion to dismiss standard in the Third Circuit)
- Davis v. Wells Fargo, 824 F.3d 333 (3d Cir. 2016) (upholding complaint sufficiency for facial plausibility under Twombly/Iqbal)
- Reifer v. Westport Ins. Corp., 751 F.3d 129 (3d Cir. 2014) (non-exhaustive factors for abstention under DJA)
- Kelly v. Maxum Specialty Ins. Grp., 868 F.3d 274 (3d Cir. 2017) (parallel proceedings and DJA abstention analysis)