Abbott Laboratories v. Alpha Therapeutic Corp.

• Decision Date: 11 January 1999
• Docket Number: No. 98-1325,98-1325
• Citation: 164 F.3d 385
• Parties: ABBOTT LABORATORIES, an Illinois corporation, Plaintiff-Appellant, v. ALPHA THERAPEUTIC CORPORATION, a California corporation, and Green Cross Corporation, a Japanese corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 385

164 F.3d 385

ABBOTT LABORATORIES, an Illinois corporation, Plaintiff-Appellant, v. ALPHA THERAPEUTIC CORPORATION, a California corporation, and Green Cross Corporation, a Japanese corporation Defendants-Appellees.

No. 98-1325.

United States Court of Appeals Seventh Circuit.

Argued Sept. 16, 1998.

Decided Jan. 11, 1999.

Terry M. Grimm (argued), Kimball R. Anderson, Raymond C. Perkins, Anne Davis Cartwright, Winston & Strawn, Chicago, IL, Sharon E. Jones, Abbott Laboratories Office of the General Counsel, Abbott Park, IL, for plaintiff-appellant.

Lindley J. Brenza (argued), Bartlit, Beck, Herman, Palenchar & Scott, Chicago, IL, for Defendant-Appellee.

Before COFFEY, ROVNER, and EVANS, Circuit Judges.

TERENCE T. EVANS, Circuit Judge.

Through a lengthy series of negotiations, Alpha Therapeutic and its parent, Green Cross, attempted to amicably settle their contract indemnification claims against Abbott Labs. When the negotiations broke down, Abbott filed this diversity action for declaratory relief, asking the district court to find that two letters between Abbott's lawyer and Alpha's lawyer constituted a binding settlement agreement. The parties filed opposing motions for summary judgment. District Judge Charles P. Korcoras found no binding settlement agreement and granted Alpha's motion for summary judgment. Abbott appeals, and we review the judgment of the district court de novo. Thiele v. Norfolk & Western Ry. Co., 68 F.3d 179, 181 (7th Cir.1995).

There is no dispute between Alpha and Abbott about the facts. The case has its roots in Abbott's sale of its scientific products division to Alpha in 1978. The division manufactured and distributed a blood product called "factor concentrate" used to treat hemophiliacs. Abbott agreed to indemnify Alpha for any losses arising from the inventory transferred. As it turned out, Abbott chose a good time to get out of the blood products business. In the 1980's, a class of hemophiliacs who claimed to be infected with HIV through the use of factor concentrate brought suit against members of the blood products industry including Alpha. Negotiations to create an industry-wide class settlement began, and Alpha commenced negotiating its indemnity claims against Abbott.

On August 9, 1996, after extensive negotiations, Sharon Jones, Abbott senior counsel, wrote to Edward Colton, Alpha general counsel, outlining Abbott's "final settlement offer." In the letter, Ms. Jones named the proposed dollar figure and outlined the "essential terms from Abbott's perspective." These terms included a series of releases that Abbott was seeking in exchange for its settlement payment. Ms. Jones also provided that because "it is Abbott's intention to have no further obligation to Alpha, ... Abbott will be proposing more precise language in the anticipated settlement agreement in order to accomplish this directive." Finally, in response to a request from Alpha, the letter indicated that Abbott would be willing to defer its payment if the parties could agree on an interest rate.

Mr. Colton responded to Ms. Jones in an August 26 letter: "Alpha has agreed to accept Abbott Laboratories' settlement offer of [the proposed settlement amount]. In general, we agreed with the terms and conditions contained in your August 9, 1996 letter." Colton also requested that the settlement agreement be "resolved with respect to all the terms and conditions and ready for execution before September 12th." He wanted to present the agreement as a "done deal" at Alpha's September 13 board meeting because several Green Cross executives from Japan who could "execute the Agreement" would be present at the board meeting. Finally, Colton asked Abbott to defer payment until January 15, 1997, and proposed a 7% interest rate.

Unfortunately, the matter did not come to a satisfactory conclusion as quickly as Colton had hoped. In the following months, the parties continued to negotiate the details of their deal, exchanging and modifying several proposed settlement agreements. On December 9, 1996, Jones sent Colton her final version of the settlement agreement and asked that the agreement be executed by December 11. On January 6, 1997, Colton informed Jones that in light of the uncertainty of the blood products class settlement negotiations, Alpha would not be willing to settle unless Abbott significantly increased the settlement amount. Instead, Abbott decided to sue.

Abbott seeks to enforce an alleged agreement between the parties that requires Alpha to indemnify Abbott indefinitely into the future for all defense costs and losses related to factor concentrate. The Illinois version of the Statute of Frauds requires that all such long-term contractual obligations be "in writing, and signed by the party to be charged." 740 ILCS 80/1 (West 1997). In addition, the original contract for the sale of Abbott's scientific products division to Alpha which created Abbott's indemnification obligations requires that any modifications be in writing. Abbott asserts the two letters exchanged by the parties in August 1996 as the signed writing required by the Statute of Frauds and the original asset sales agreement. Therefore, the sole issue before us is whether those two letters constitute a binding settlement agreement.

Local contract law governs the construction and enforcement of settlement agreements. See Laserage Tech. Corp. v. Laserage Lab., Inc., 972 F.2d 799, 802 (7th Cir.1992). Under Illinois contract law, a binding agreement requires a meeting of the minds or mutual assent as to all material terms. See SBL Assoc. v. Village of Elk Grove, 247 Ill.App.3d 25, 31, 186 Ill.Dec. 939, 617 N.E.2d 178, 182 (1993). Whether the parties had a "meeting of the minds" is determined not by their actual subjective intent, but by what they expressed to each other in their writings. Thus, the parties decide for themselves whether the results of preliminary negotiations bind them, and they do so through their words. See Empro Mfg. Co. v. Ball-Co Mfg., Inc., 870 F.2d 423, 425 (7th Cir.1989) citing Chicago Inv. Corp. v. Dolins, 107 Ill.2d 120, 89 Ill.Dec. 869, 481 N.E.2d 712, 715 (1985).

Abbott contends that the...