Wyeth v. King Pharmaceuticals, Inc.
| Decision Date | 17 October 2005 |
| Docket Number | No. 04CV4068 (SLT/RML).,04CV4068 (SLT/RML). |
| Citation | 396 F.Supp.2d 280 |
| Parties | WYETH, Plaintiff, v. KING PHARMACEUTICALS, INC., Defendant. |
| Court | U.S. District Court — Eastern District of New York |
Bruce S. Kaplan, Emily A. Stubbs, Friedman, Kaplan, Seiler & Adelman LLP, New York, NY, for Plaintiff.
Emily M. Yinger, Hogan & Hartson LLP, McLean, VA, Jonathan M. Sobel, Hogan & Hartson LLP, New York, NY, for Defendant.
Plaintiff, Wyeth,1 a Delaware corporation, moves for summary judgment on the issues of liability and damages in this breach of contract action. Defendant, King Pharmaceuticals, Inc. ("King"), a Tennessee corporation, moves to strike the ad damnum clause of the complaint or, in the alternative, for summary judgment. For the reasons discussed below, Plaintiff's motion and those of the Defendant are hereby DENIED. The Court's Order, dated December 22, 2004, holding discovery in abeyance, is hereby vacated.
On September 20, 2004, Wyeth commenced this action against King, alleging one cause of action for breach of contract. In an agreement dated June 22, 2000 (the "Copromotion Agreement"), the parties agreed that for a term of eight years, they would work together to promote Altace®, a pharmaceutical product designed to reduce the risk of heart attacks and strokes. Before entering into this agreement, King marketed and distributed Altace® and Wyeth "was engaged in the business of and had expertise in" promoting pharmaceutical products to physicians. (See id.) King granted Wyeth exclusive rights to promote Altace®, together with King. (Agreement § 2.1.) Wyeth received twenty-five million dollars as an initial payment for these rights at the time the parties executed the contract, and another fifty million dollars thirty days thereafter. Id. King was also required to pay Wyeth annual promotion fees calculated as percentages of net sales for each of the years of the contract. (Agreement § 9.1.)
To ensure the success of Altace®, each party's sales force is required to make a certain number of visits, called "Details" (see Agreement §§ 3.1, 4.1), to physicians' offices to promote the pharmaceutical product.2 Every year, the Altace® Management Committee ("AMC"), on which three representatives of each party sit, creates an annual marketing plan that sets out the minimum number of required Details per quarter and for the year. (See Agreement §§ 8.1, 8.5.)
At issue on these cross-motions are two sections of the Copromotion Agreement: Section 9.4 and Section 11.4. Section 9.4 of the Copromotion Agreement states in its entirety:
If, during any calendar year during the Term, a party reasonably determines, based on the AHPC Detail Reports or the KING detail reports, as the case may be, that the other party is failing to conduct the minimum number or percentage of Details (the "Minimum Targeted Details") required to be conducted by such other party by the Marketing Plan for such year, then such party may elect to conduct a greater number of Details than the Minimum Targeted Details for such party (such greater number of Details, the "Excess Details"). A party conducting Excess Details shall notify the other party promptly in writing following the Agreement Quarter in which such Excess Details were conducted, and within thirty (30) days after receipt of such notice, the other party shall pay to such party an amount equal to two (2) times the then Current Detail Cost multiplied by the number of Excess Details; provided, that any payments to a party under this Section 9.4 on Details in excess of one hundred five percent (105%) of the Minimum Targeted Details for such party for any calendar year shall be subject to prior approval of the AMC.
(Agreement § 9.4) (emphasis in original). Section 11.4 of the Copromotion Agreement states in its entirety:
Notwithstanding any provision in this Agreement to the contrary, in the event that either party (the "Nonperforming Party") fails to perform at least ninety percent (90%) of the minimum number of Details it is required to perform during any calendar year and the other party has performed at least ninety percent (90%) of the minimum number of Details it is required to perform during such calendar year, such other party shall have sixty (60) days from its receipt of the Nonperforming Party's final Detail Report for such calendar year to notify the Nonperforming Party that it is in breach of such obligations, in which event the Nonperforming Party shall have the opportunity to cure such default by providing a sufficient number of extra Details to make up for such short fall prior to the end of the first full calendar quarter following the calendar quarter in which the other party provides such breach notice to the Nonperforming Party. In the event the Nonperforming Party fails to cure such default, the other party may, within thirty (30) days after the end of such calender quarter terminate this Agreement on sixty (60) days' prior notice to the Nonperforming Party. If the other party (i) fails to give timely notice of the Nonperforming Party's breach or of termination due to the other Nonperforming Party's failure to cure such breach in accordance with this Section 11.2(b) [sic] or (ii) elects, in accordance with Section 9.4 hereof, to perform excess Details to make up the Nonperforming Party's shortfall of required Details, the other party shall be deemed to have waived its rights under this Section 11.2(b) [sic] as to any further breaches by the Nonperforming Party. Notwithstanding the foregoing, the parties agree that the Nonperforming party shall not be in breach of its Detailing obligations for any calendar year hereunder if the Nonperforming party provides at least ninety percent (90%) of the minimum number of Details it is required to perform during such calendar year.
(Agreement § 11.4) (emphasis in original).
Wyeth states (and King does not dispute) that King failed to meet the minimum number of required Details for the second and third quarters of 2003. (Pl. 56.1 Stat. ¶¶ 2-3; Def. 56.1. Stat. ¶¶ 2-3.) Specifically, the minimum number of Details required in the second quarter of 2003 was 288,333; King reported 248,082 Details for this quarter. (Pl. 56.1 Stat. ¶¶ 2; Def. 56.1. Stat. ¶¶ 2-3.) For the third quarter, it reported 241,348 Details against a minimum of 288, 334. (Pl. 56.1 Stat. ¶¶ 3; Def. 56.1. Stat. ¶¶ 2-3.) King claims that it "assured Wyeth that it was taking (and indeed did take) appropriate action to bolster its sales force to meet its 2003 Detailing Obligations." (Def.56.Stat.¶¶ 2-3.) Nevertheless, it is undisputed that King did, in fact, conduct the minimum number of required Details for the year, e.g., 90% of the 2003 minimum number of required Details. Id.
After receiving notification that King failed to meet its minimum number of required Details for the third quarter of 2003 — the second such quarter in a row, Wyeth claims that it "made a reasonable determination" that King "was failing to conduct the minimum number of Details required [pursuant to] the 2003 Altace® Marketing Plan." (Pl. 56.1 Stat. ¶ 4.) Wyeth states that it exceeded the annual minimum number of 1,100,000 Details by performing 1,920,654 Details in 2003. (Czenszak Dec. ¶ 18.) It also claims that after adjusting its fourth quarter of 2003 Detail report for a minor reporting error, it performed 439,460 Details which exceeded the minimum number required by 164,460. (Czenszak Dec. ¶ 20.)
On February 26, 2004, Wyeth demanded payment from King in the amount of $8,851,700 for 55,000 Excess Details pursuant to Section 9.4 of the Copromotion Agreement. (Pl. 56.1 Stat. ¶ 6; Pl. 56.1 Stat. Ex. 8.) This section requires the AMC to approve a claim for Excess Details that is greater than 105% of the annual minimum required number of Details. (See Agreement § 9.4.) Consequently, since the 2003 annual minimum required number of Details was 1,100,000, Wyeth claimed compensation for only 55,000 Excess Details. (Czenszak Dec. ¶ 23.) King refused to pay this amount. (Pl. 56.1 Stat. ¶ 7.)
King disputes Wyeth's version of events:
First, it claims that Wyeth was required to, and in fact did not, determine that King would fail to meet its minimum number of required Details before performing Excess Details. (Def. 56.1 Stat. ¶ 4.) It points out that Wyeth was above the quarterly targets throughout 2003; that its number of Altace® Details declined over the year; and that it conducted fewer Details in the fourth quarter than in any other quarter of 2003. Id. King claims that these facts demonstrate that the "Excess Details," for which Wyeth claims compensation, were not a result of a "reasonable determination," but a natural consequence of the "ordinary course of Wyeth's previously planned sales activities." Id.
Second, King claims that many of Wyeth's claimed Details do not qualify as Details under the Corpromotion Agreement because the sales representatives either did not discuss Altace® primarily during their visits with doctors, or they included group presentations conducted at hospitals as Details. (Def. 56.1 Stat. ¶ 5.)
Third, King claims that it does not owe Wyeth for Excess Details because Wyeth's interpretation of Section 9.4 is erroneous in light of discussions around its drafting as well as the text of Section 11.4. (Def. 56.1 Stat. ¶¶ 6-7.) Fourth, King disputes Wyeth's claims that it waived its right to challenge Wyeth's fulfillment of its Detailing obligations under the Copromotion Agreement. (Def. 56.1 Stat. ¶ 8.)
Rule 56(c) of the Federal Rules of Civil Procedure state that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories,...
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