170 F. Supp. 3d 612
S.D.N.Y.2016Background
- Neopharm Ltd. and its Israeli subsidiary Promedico Ltd. distributed Wyeth products in Israel for ~70 years until Wyeth unilaterally terminated in May 2014.
- Distribution Agreement (2002) and amendments govern the relationships and termination procedures; amendments in 2009 affected Section 7.1 and added 7.1’s timing restrictions.
- In 2009, after MOH vaccine deal negotiations, the 2009 amendment added a sentence delaying three-year notice until MOH matters concluded.
- MOH deal with Israeli government ran at least through June 2015, with Prevenar vaccination program implicated in ongoing obligations.
- Wyeth terminated the agreement on May 1, 2014 by paying the amount required under Section 7.5(b) rather than providing three years’ notice; Neopharm contests the termination as unauthorized.
- Court disposition: ruling on pleadings; holds Wyeth cannot terminate without cause under 7.5(b) or 7.2(f); grants Neopharm’s motion and dismisses Wyeth’s counterclaim to the extent based on 7.5(b).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 7.5(b) independently terminates the contract. | Neopharm: 7.5(b) cannot serve as an independent escape; 7.1 governs termination. | Wyeth: 7.5(b) provides an independent pay-to-terminate option. | Unambiguous; 7.5(b) does not independently terminate the contract. |
| Effect of the June 2009 amendment on 7.1 and 7.5(b). | Amendment suspends three-year notice during MOH period; 7.1 and 7.5(b) align with that suspension. | Amendment does not affect 7.5(b)’s operation independent of 7.1. | Amendment prohibits 7.1 notice during MOH period; 7.5(b) still not independently operable. |
| Whether Wyeth could terminate for cause under 7.2(f). | Wyeth claims 7.2(f) permits termination for willful false statements. | Wyeth contends 7.2(f) supports termination based on false statements. | Wyeth fails to plead plausible grounds under 7.2(f). |
| Whether Wyeth’s 7.2(f) counterclaim is supported by the alleged email statements about Xeljanz. | Emails show conditional statements about collaboration; not material false statements in performance of obligations. | Statements allegedly false were made in pursuit of new business and are not within performance obligations. | No plausible claim under 7.2(f). |
| Whether the 7.2(f) counterclaim plausibly alleges misrepresentations in performance to support termination. | Alleged false statements occurred during discussions to expand portfolio. | Pitch emails are not misrepresentations in performance of obligations. | Counterclaim insufficiently pleaded. |
Key Cases Cited
- Alexander & Alexander Servs., Inc. v. These Certain Underwriters at Lloyd’s, London, England, 136 F.3d 82 (2d Cir.1998) (ambiguous contracts require extrinsic evidence; ambiguity test at substance of contract)
- Twombly, Bell Atlantic Corp. v., 550 U.S. 544 (2007) (plausibility standard for pleading)
- Greenfield v. Philles Records, Inc., 98 N.Y.2d 562 (N.Y.) (ambiguity depends on reasonableness of interpretations)
- Kass v. Kass, 91 N.Y.2d 554 (1998) (court look to overall intent of agreement)
- Bank of N.Y. v. First Millennium, Inc., 607 F.3d 905 (2d Cir.2010) (standard for judgment on the pleadings)
- JA Apparel Corp. v. Abboud, 568 F.3d 390 (2d Cir.2009) (contract ambiguity not merely because of multiple interpretations)
- Elbit Sys. Ltd. v. Credit Suisse Grp., 842 F.Supp.2d 733 (S.D.N.Y.2012) (ambiguity assessment in contract interpretation)