862 F.2d 597 (6th Cir. 1988), 87-3352, Canderm Pharmacal, Ltd. v. Elder Pharmaceuticals, Inc.

Docket Nº:87-3352, 87-3368.
Citation:862 F.2d 597
Party Name:CANDERM PHARMACAL, LTD., Plaintiff-Appellee, Cross-Appellant, Sylvia Vogel, Plaintiff, Cross-Appellant, v. ELDER PHARMACEUTICALS, INC., Defendant-Appellant, Cross-Appellee, ICN Pharmaceuticals, Inc.; SPI Pharmaceuticals, Inc., Defendants, Cross-Appellees.
Case Date:December 01, 1988
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 597

862 F.2d 597 (6th Cir. 1988)

CANDERM PHARMACAL, LTD., Plaintiff-Appellee, Cross-Appellant,

Sylvia Vogel, Plaintiff, Cross-Appellant,

v.

ELDER PHARMACEUTICALS, INC., Defendant-Appellant, Cross-Appellee,

ICN Pharmaceuticals, Inc.; SPI Pharmaceuticals, Inc.,

Defendants, Cross-Appellees.

Nos. 87-3352, 87-3368.

United States Court of Appeals, Sixth Circuit

December 1, 1988

Argued Sept. 20, 1988.

Page 598

Eric M. Oakley, argued, Miriam R. Arfin, Squire, Sanders & Dempsey, Cleveland, Ohio, for appellant, cross-appellee.

Ralph W. Gallagher, Gallagher, Milliken & Stelzer, Bryan, Ohio, John C. Milliken, argued, for appellee, cross-appellant.

Before WELLFORD and BOGGS, Circuit Judges, and PECK, Senior Circuit Judge.

BOGGS, Circuit Judge.

Elder Pharmaceuticals, Inc. (Elder) appeals from the trial judge's ruling refusing to submit to the jury its defense that it had timely revoked its anticipatory repudiation. Canderm Pharmacal, Ltd. (Canderm) crossappeals, as does Canderm's President, Sylvia Vogel. Canderm filed its complaint on December 17, 1984 against Elder, Elder's parent corporation (SPI), and another SPI subsidiary (ICN) for breach of contract, tortious interference with contractual relations, and personal damages on behalf of Sylvia Vogel (Vogel), Canderm's President and sole shareholder. Elder counterclaimed for injury to its reputation and loss

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of sales. This court has diversity jurisdiction under 28 U.S.C. Sec. 1332.

The trial court made a number of pretrial rulings and findings. First, it granted ICN's motion to dismiss for lack of personal jurisdiction, thereby eliminating ICN as a party. Later, it granted defendants' motion for summary judgment, dismissing SPI from the case and limiting the issues for trial between Elder and Canderm to the breach of contract claims. In its memorandum and order of summary judgment, the court made a number of findings: (1) Ohio law precludes an action for breach of an implied covenant of good faith and fair dealing; (2) SPI was privileged to interfere with the contract, so Canderm's claim of tortious interference must fail; (3) Vogel lacked standing although she was President and sole shareholder of Canderm; (4) Vogel had alleged no personal injuries; (5) the defendants had not acted with malice; and (6) the acts of SPI were the acts of Elder so that there could be no tortious interference with the contract between Canderm and Elder. The court further ruled that Elder had anticipatorily repudiated the contract, and would not let the jury consider Elder's contentions that it had timely revoked any repudiation. The jury trial was thus limited to the issue of fixing the amount of damages. The jury awarded Canderm $706,938.00 in Canadian dollars. Based on the then-existing exchange rate, the judge entered judgment for Canderm in the amount of $537,767.73 in American dollars. Elder, Canderm, and Vogel filed notices of appeal.

We affirm on all issues except on the issue of Elder's alleged revocation of its anticipatory repudiation.

I

The facts underlying this action are as follows. Canderm is a Canadian pharmaceutical distributor with its principal place of business in Montreal, Quebec. Elder is an Ohio corporation that manufactures pharmaceuticals. On July 1, 1973, Canderm and Elder entered into a contract granting Canderm the exclusive right to distribute Elder products in Canada. The contract contained two relevant provisions: first, for the agreement to continue, Canderm's sales must be equal to or greater than 9.8% of Elder's domestic sales in the United States; and, second, Vogel must continue to be the majority shareholder in Canderm. In addition, the contract was renewable at Canderm's sole option. The first contract term was one year, the second was four years, and the third was five years. Canderm notified Elder that it wanted to renew the contract in 1974, 1978, and 1983. In 1983, the president of Elder acknowledged Canderm's right to renew in 1988. Canderm's sales of Elder products grew from $25,000 to $470,000 from 1973 to 1983.

In March, 1984, SPI notified Canderm that it had bought Elder and that, effective June 30, 1984, the contract would be cancelled. SPI was the parent company of ICN Canada Ltd., and the undisputed motivation for SPI's cancellation of the contract between Elder and Canderm was to transfer the distribution rights of Elder products to ICN. There is some dispute over whether SPI's goal was to consolidate its operations, or whether its ultimate purpose was to eliminate Canderm, which allegedly was in direct competition with ICN.

Upon receipt of SPI's letter of cancellation, Canderm immediately notified SPI that it considered that it had a valid contract with Elder and would not allow SPI to cancel. On that same day, April 13, 1984, Canderm submitted an order, and confirmed the order on June 8, 1984. On June 14, 1984, Canderm sent an announcement to other participants in the pharmaceutical industry stating that, though SPI had purchased Elder, Canderm remained the sole Canadian distributor of Elder products. However, on July 3, 1984, ICN sent a letter to Canadian wholesalers saying that future orders of Elder products should be arranged through ICN, and, that month, a shipment of Elder products was sent to ICN.

On August 16, 1984, Canderm secured an interlocutory injunction against Elder and ICN which contained three orders: first, Elder must continue to deal with Canderm

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pursuant to the contract; second, Elder could not sell to any company in Canada other than Canderm; and, third, ICN could not sell Elder products in Canada.

On August 21, 1984, Canderm wrote to Elder, saying that it assumed that Elder would comply with the injunction, and confirmed its earlier order with Elder, adding an order for another product. Canderm stated in this letter that if there was no confirmation of the delivery date of this order within ten days, Canderm would tell its customers that Elder products were no longer available in Canada.

Elder initially resisted compliance with the injunction, and voiced its reluctance in a September 19, 1984 letter. At that time, the above-mentioned orders still were outstanding. Canderm placed no further orders with Elder.

On October 15, 1984, the Vice President of SPI proposed a monetary settlement. On October 16, 1984, Canderm announced to the Canadian market that Elder products had been discontinued. Shortly thereafter, on October 29, 1984, Canderm rejected SPI's settlement offer.

On November 12, 1984, SPI wrote Canderm, informing it that SPI had directed Elder to fill Canderm's outstanding orders and asking Canderm to place more orders so that Elder could fulfill the first term of the injunction. Canderm then rejected the shipment of the outstanding order and placed no further orders. Thus, alleging that Canderm was preventing it from complying with the injunction, Elder moved that the court lift the injunction just after Canderm filed the present suit.

On December 1 to 6, 1984, ICN attended a dermatology convention, where it listed itself as the Canadian distributor of Elder products, and a 1985 trade publication also listed ICN as the Canadian distributor of Elder products.

On February 14 and 15, 1985, a hearing on Elder's motion to lift the injunction was held. Vogel, Canderm's president, testified that Canderm still wanted to purchase and distribute Elder products. The court denied Elder's motion based on this testimony.

On February 27, 1985, Elder's Treasurer, Paul Maier, wrote Canderm saying that Elder was ready to comply with the injunction by resuming performance of the contract, and again asking Canderm to place an order so that...

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