461 F.Supp.3d 119
D.N.J.2020Background
- Zydus (buyer) and Teva (seller) executed an Asset Purchase Agreement (APA) on June 16, 2016, transferring rotigotine-related ANDA/assets; the APA contains a New York choice-of-law clause and an exclusive New York forum-selection clause for disputes "arising out of" the APA.
- Before the APA closed, Zydus and Teva’s affiliate Teva API Inc. (TAPI) entered a binding Letter of Intent (LOI) on May 24, 2016, in which TAPI agreed to supply commercial quantities of Form I rotigotine at a set price for an initial three-year term.
- TAPI later informed Zydus it would not supply Form I rotigotine (citing a polymorphism/production issue); Zydus sued TAPI in New Jersey for breach of the LOI, specific performance, and promissory estoppel.
- TAPI moved to dismiss, principally arguing the APA’s New York forum-selection clause governs and therefore this suit is in the wrong forum; it also sought dismissal of the promissory estoppel claim.
- The Court analyzed (1) whether a forum clause in the APA binds non-signatory TAPI (scope issue), (2) which state’s law governs that scope question, and (3) whether promissory estoppel is viable given the LOI.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the APA’s New York forum-selection clause governs Zydus’s suit against non-signatory TAPI | The LOI is a separate, binding supply contract with TAPI; the APA’s forum clause does not reach this independent LOI dispute | The APA and LOI are part of the same transaction; under the APA the forum clause governs related disputes and thus this action must be in New York | Denied: APA forum clause does not bind non-signatory TAPI under New Jersey law; New Jersey law governs scope and precludes enforcing the APA clause against TAPI |
| Which state law governs the scope of the forum-selection clause (NJ or NY)? | New Jersey law applies (Klaxon choice-of-law rules); scope is a question of state contract law of the forum | TAPI urged New York law because the APA selects New York and that law is more favorable to binding non-signatories | Held New Jersey law applies under Klaxon and New Jersey choice-of-law analysis (Restatement §188) because the LOI is the contract at issue and contacts favored NJ |
| Whether, under applicable law, a non-signatory may be bound/benefit from a forum clause (i.e., is TAPI a third-party beneficiary or "closely related"?) | Zydus: New Jersey law limits enforcement to signatories or intended third-party beneficiaries; TAPI is neither | TAPI: Under New York/federal common law, non-signatories may be bound when contracts are part of a global transaction or parties are closely related | Held: Under New Jersey law (and on the record), TAPI is not a signatory or intended beneficiary and not sufficiently "closely related;" the APA clause does not apply to TAPI. Even under federal/common-law tests, facts do not show close relation or global transaction |
| Whether promissory estoppel claim should survive given the LOI breach claim | Zydus pleaded promissory estoppel in the alternative if the LOI is not enforceable | TAPI: Promissory estoppel barred because an express, binding LOI governs the same subject matter | Held: Promissory estoppel dismissed without prejudice because an express contract (the LOI) governs the identical subject matter; quasi-contract theory is redundant at this stage |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (established the federal plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (clarified application of the plausibility standard and reasonable inference requirement)
- Jumara v. State Farm Ins. Co., 55 F.3d 873 (3d Cir. 1995) (federal law governs enforceability of forum-selection clauses in diversity cases)
- Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22 (U.S. 1988) (forum-selection clause analysis and enforceability principles)
- Bremen v. Zapata Off–Shore Co., 407 U.S. 1 (U.S. 1972) (forum-selection clauses are prima facie valid and should be enforced absent unreasonableness)
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (U.S. 1941) (federal courts in diversity apply the forum state’s choice-of-law rules)
- In re McGraw-Hill Glob. Educ. Holdings LLC, 909 F.3d 48 (3d Cir. 2018) (distinguishes enforceability—federal law—from scope—state contract law—of forum clauses)
- Collins v. Mary Kay, Inc., 874 F.3d 176 (3d Cir. 2017) (applies state law to decide whether a forum-selection clause covers particular claims/parties)
- Dayhoff Inc. v. H.J. Heinz Co., 86 F.3d 1287 (3d Cir. 1996) (court must decide whether forum clause covers the claims and parties involved)