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Bristol-Myers Squibb Co. v. Matrix Laboratories Limited

United States District Court, S.D. New York

July 20, 2015

BRISTOL-MYERS SQUIBB COMPANY, Plaintiff,
v.
MATRIX LABORATORIES LIMITED, now known as Mylan Laboratories Limited, Defendant.

OPINION & ORDER

PAUL A. ENGELMAYER, District Judge.

On May 13, 2015, the Court dismissed plaintiff Bristol Myers-Squibb Company's ("BMS") Second Amended Complaint ("SAC"), which asserted two breach of contract claims against defendant Matrix Laboratories Limited ("MLL"). On June 3, 2015, BMS filed a motion for reconsideration. For the following reasons, that motion is denied.

I. Background

The Court assumes familiarity with the facts of this case and with the Court's May 13 Opinion and Order. See Dkt. 74 ("May 13 Opinion"), reported at Bristol-Myers Squibb Co. v. Matrix Labs. Ltd., No. 12 Civ. 5846 (PAE), 2015 WL 2257705 (S.D.N.Y. May 13, 2015). The facts and procedural history relevant to the instant motion are briefly summarized below.

A. Factual Background

On April 17, 2011, BMS and MLL entered into an "immunity from suit" agreement. SAC ¶ 2; see also id. Ex. I (the "Agreement"). Under the Agreement, BMS gave MLL the right to manufacture, distribute, and sell the HIV/AIDS drug atazanavir in certain underdeveloped countries without fear of litigation by BMS, which has patents or pending patent applications related to atazanavir in more than 50 countries. Id. ¶¶ 1 n.1, 2, 30. The Agreement immunized MLL's sale of generic atazanavir only in the specified "Territory, " which was defined to include India and 44 countries in sub-Saharan Africa. See Agreement § 1.10 & App'x C. Accordingly, BMS retained its existing rights to sue MLL for patent infringement if MLL sold atazanavir outside the Territory. Agreement § 3.1(a). The Agreement also provided in § 3.1(d)-the provision at issue here-that MLL "shall not sell, distribute, or otherwise transfer Products manufactured hereunder to any third parties it reasonably believes may export the Products outside the Territory where Patents exist."

This case involves sales of atazanavir in Venezuela, which falls outside the Territory as defined in the Agreement. See Agreement App'x C; SAC ¶¶ 4, 31. BMS alleges that in 2012 and 2014, MLL sold a significant amount of atazanavir to the Pan American Health Organization ("PAHO"), knowing that PAHO would then distribute the drugs in Venezuela. Id. ¶¶ 10-11, 36, 15, 42-43. The atazanavir was later shipped to the Venezuelan Ministry of Health and distributed throughout Venezuela. Id. ¶¶ 11-12, 36-37.

B. Procedural History

On July 30, 2012, BMS filed its original Complaint, Dkt. 1, and on April 16, 2013, the First Amended Complaint, Dkt. 17 ("FAC"). The FAC's theory of liability was that any sales by MLL that resulted in the distribution of atazanavir in Venezuela would themselves breach the Agreement. According to the FAC, the Agreement "expressly prohibit[ed] [MLL] from selling or distributing atazanavir, either directly or indirectly, into countries where BMS maintains a patent or, as here, where it has a patent pending." FAC ¶ 13.

On May 15, 2013, MLL moved to dismiss. Dkt. 18. On August 12, 2013, after briefing, the Court granted MLL's motion, finding that the FAC failed to state a claim. Dkt. 30. The Court held that BMS read the Agreement too broadly by construing it to affirmatively prohibit MLL from bringing about sales of atazanavir outside the Territory. Id. at 12-16. Although preserving BMS's right to bring patent infringement lawsuits against MLL for sales of atazanavir outside the covered Territory, the Court held that the Agreement did not contain a freestanding prohibition on such sales, so as to give rise to a breach of contract claim whenever such sales occur. Id. at 15-16. Rather, the Agreement imposed a prohibition on sales outside the Territory only in the context of sales by MLL "to any third parties [MLL] reasonably believes may export the Products outside the Territory where Patents exist." Id. at 14 (quoting Agreement § 3.1(d)). And the FAC, the Court noted, "[did] not anywhere allege that PAHO was located in the Territory and thereafter exported the products outside the Territory." Id. at 15.

BMS appealed. Dkt. 32. On October 7, 2014, after briefing and argument, the Second Circuit issued its decision. See Bristol-Myers Squibb Co. v. Matrix Labs. Ltd., 586 F.Appx. 747 (2d Cir. 2014) (summary order). The Second Circuit agreed with this Court that § 3.1(d) was the only part of the Agreement that could give rise to liability for breach of contract based on sales outside the Territory, and that the FAC, as pled, did not allege a breach of § 3.1(d). See id. at 750-51. The Circuit further agreed with this Court that, under § 3.1(d), MLL could not be in breach for its own export of atazanavir from the Territory to an entity in a place outside the Territory-the theory of liability articulated in the FAC. See id. at 750. Rather, the Circuit held, the Agreement "unambiguously cover[ed] only those situations in which the third party' is performing the exportation" by "mov[ing] the product from the Territory to some other location." Id. at 750-51 & n.1.

On appeal, however, BMS had articulated a new theory of liability, one not included in the FAC. BMS argued there that the word "export" as used in § 3.1(d) is ambiguous, and that under some meanings of that term, PAHO, despite being situated outside the Territory, might nonetheless qualify as an "exporter" of the atazanavir from within the Territory to Venezuela. Id. at 750. The Circuit agreed that the word "export" in § 3.1(d) prohibited both "transfers [by MLL] of atazanavir to third parties that are present in the Territory, '" the scenario this Court had addressed in its August 12, 2013 Opinion, and also "transfers to third parties located anywhere when the transferee takes title to the products while those products are present in the Territory" and MLL reasonably believes the third party will then export these products outside. Id. Because the FAC's allegations were "not sufficient to support the inference that PAHO... took title to the atazanavir in the Territory, " id. at 751, the Circuit remanded "so [that] BMS can seek leave to amend its complaint" consistent with the latter theory of liability, id. at 752.

On November 25, 2014, with this Court's leave, BMS filed the SAC. Dkt. 39. The SAC primarily pursued the theory of liability recognized as viable by the Second Circuit, to wit, that MLL had breached § 3.1(d) of the Agreement by selling atazanavir to a third party, PAHO, that was situated outside the Territory but took title to the atazanavir in the Territory, and that MLL "reasonably believ[ed] that PAHO may export the Products outside the Territory." Id. ¶¶ 16, 18, 37-38, 42-43. To support its claim that PAHO took title in the Territory, BMS alleged that the agreement between MLL and PAHO had been a "shipping contract' pursuant to § 2-401 of the Uniform Commercial Code ["UCC"], under which title passes to the buyer at the time and place of shipment." Id. ¶ 11. BMS also attempted to plead a different theory: that PAHO was an exporter because it had "controlled the decision of where the product would be sent, " id. ¶ 12, and by doing so "exported the product to the Venezuela Ministry of Health using a common carrier, " id. ¶ 37.

On January 9, 2015, MLL filed a motion to dismiss. Dkt. 42. On May 13, 2015, after briefing and argument, the Court granted the motion.

The Court held that the SAC did not supply a "basis on which the Court could infer that title to the atazanavir transferred from MLL to PAHO in India." May 13 Opinion at 13. The Court concluded that the UCC, which, as noted, provides that "title passes to the buyer at the time and place of shipment, " does not apply to the transactions between MLL and PAHO, id. at 11-12; BMS, in fact, had so conceded at oral argument. See Dkt. 72, at 25-27. Further, the Court noted, the Incoterms, which, as MLL had correctly argued, do apply to those transactions, do not address title transfer. Id. at 10-11. Finally, the Court noted, ...


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