Rex Medical L.P. v. Angiotech Pharmaceuticals (US), Inc.
2010 U.S. Dist. LEXIS 129195
S.D.N.Y.2010Background
- Rex Medical, L.P. sought a preliminary injunction to prevent Angiotech from terminating the Agreement governing Rex's Option filter device.
- Angiotech held exclusive worldwide license to market and distribute Option, Rex's best-selling product accounting for about 90% of Rex's revenue.
- The March 13, 2008 License, Supply, Marketing, and Distribution Agreement (effective Sept. 1, 2009) set terms for exclusivity, sales obligations, and milestone payments to Rex.
- Angiotech could terminate on 90 days' notice only for specified causes (section 8): Rex material breach, loss of patent, or Rex insolvency; otherwise, termination required notice and could be arbitrate disputes under section 10.
- On Nov. 11, 2010 Angiotech informed Rex of termination due to lack of economic viability; note the company faced financial distress in 2010.
- Rex moved for a preliminary injunction in aid of arbitration to maintain the status quo pending arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Irreparable harm from termination | Rex argues irreparable harm to goodwill and continued customer relationships if Option is halted. | Angiotech contends any harm is compensable by damages and the contract’s economics justify termination. | Irreparable harm shown; loss of 90% of Rex's revenue and disruption to customers warrants injunctive relief. |
| Likelihood of success on the merits of contract breach | Angiotech had no legitimate basis to terminate; section 8 lists exclusive grounds for unilateral termination. | Section 3 allows Angiotech to determine how to market and may stop marketing if economically unviable. | Rex likely to prevail; section 8 governs termination, and Angiotech cannot rely on section 3 to terminate on short notice without meeting section 8 conditions. |
| Arbitration and status quo | Relief is necessary to preserve the status quo during arbitration as required by FAA. | N/A or not supportive of keeping the status quo if termination is lawful. | Court can grant injunctive relief in aid of arbitration to maintain status quo pending arbitration. |
| Balance of hardships | Relief protects Rex's customers, goodwill, and ongoing business; Angiotech bears continued losses under an unprofitable arrangement. | Continued performance worsens Angiotech’s financial condition; injunction would harm creditors. | Hardships favor Rex; contract obligations and status quo protection outweigh Angiotech’s financial distress. |
| Public interest | Enforcing arbitration and contract terms serves public policy of honoring freely made bargains. | N/A beyond opposing enforcement of obligations during arbitration. | Public interest favors enforcing the arbitration clause and the contract. |
Key Cases Cited
- Salinger v. Colting, 607 F.3d 68 (2d Cir. 2010) (four-factor framework for preliminary injunctions in light of eBay)
- eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (U.S. 2006) (rejected the traditional four-factor test; requires traditional four-factor analysis for injunctions)
- Reuters Ltd. v. United Press Int'l, 903 F.2d 904 (2d Cir. 1990) (irreparable harm from loss of product supply and goodwill)
- Tom Doherty Assocs., Inc. v. Saban Entm't, Inc., 60 F.3d 27 (2d Cir. 1995) (loss of goodwill as irreparable harm when it threatens business viability)
- Blumenthal v. Merrill Lynch, Pierce, Fenner & Smith, 910 F.2d 1049 (2d Cir. 1990) (arbitration and injunction interplay; maintaining status quo during arbitration)
- New York City Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F. Supp. 2d 305 (S.D.N.Y. 2010) (pendency of arbitration and preservation of contract rights)
- Volt Info. Sciences, Inc. v. Leland Stanford, Jr. Univ., 489 U.S. 468 (U.S. 1989) (FAA enforcement of arbitration agreements)