IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

MERCK & CO., INC.,

 Plaintiff,

 v.

BAYER AG,

 Defendant.

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C.A. No. 2021-0838-NAC

 

MEMORANDUM OPINION

Date Submitted: December 19, 2022

Date Decided: April 3, 2023

James D. Taylor, Jr., SAUL EWING LLP, Wilmington, Delaware; Amy S. Kline, 

SAUL EWING LLP, Philadelphia, Pennsylvania; Joseph D. Lipchitz, SAUL 

EWING LLP, Boston, Massachusetts; Counsel for Plaintiff Merck & Co., Inc.

Rudolf Koch, Kyle H. Lachmund, Kevin M. Kidwell, RICHARDS, LAYTON & 

FINGER, P.A., Wilmington, Delaware; Dustin F. Guzior, Y. Carson Zhou, 

SULLIVAN & CROMWELL LLP, New York, New York; Counsel for Defendant 

Bayer AG.

COOK, V.C.
This litigation arises from the disputed interpretation of a Stock and Asset 

Purchase Agreement (“SAPA”) between Plaintiff Merck & Co., Inc. (“Merck”) and 

Defendant Bayer AG (“Bayer”). Merck and Bayer are two of the largest 

pharmaceutical companies in the world. In 2014, Merck and Bayer entered the 

SAPA pursuant to which Bayer purchased Merck’s Claritin, Coppertone, and Dr. 

Scholl’s product lines. Bayer paid Merck more than $14 billion in cash for these 

product lines. 

After the transaction closed, both Merck and Bayer were the subject of 

lawsuits alleging injuries arising from consumers’ use of talc-based products. These 

product liability claims concern talcum powder or “talc” that Merck used in certain 

foot powder product lines sold to Bayer. The lawsuits claim that asbestos allegedly 

contained in talcum powder has caused fatal cancers. As a result of these lawsuits, 

producers of talcum products potentially face billions of dollars of liability, in the 

form of both litigation costs defending such claims and in payouts to consumers.

Merck and Bayer, as sophisticated participants in the pharmaceutical industry, 

understood that consumer products businesses face potential liability for torts 

associated with the sale of such consumer products. The acquiror of a large 

consumer products business has two distinct concerns regarding potential product 

liability claims filed after a transaction’s closing but related to products sold before

the closing. The first is the allocation between the buyer and seller of substantive 
2

liability to third-party consumers, including judgments and settlements. The second 

is costs that the acquiror may incur, as the new owner of the business, with being 

involved in product liability lawsuits, even though any liability to the third-party 

consumer that brought the suit was allocated to the seller. 

As discussed in detail below, the SAPA clearly and unambiguously provides 

that Merck indefinitely retained substantive liability for the product liability claims 

related to products sold prior to the closing of the transaction. While Merck attempts 

to argue that its liability for the product liability claims ceased on October 1, 2021, 

this interpretation is contrary to the clear and unambiguous terms of the SAPA.

Considering Bayer’s interpretation of the SAPA is the only reasonable one, 

this Memorandum Opinion grants Bayer’s motion to dismiss Merck’s complaint.

I. FACTUAL BACKGROUND1

On May 5, 2014, Merck and Bayer entered the SAPA whereby Merck would 

sell, and Bayer would purchase, Merck’s consumer care business and consumer care 

1 I draw the relevant facts from the Verified Amended Complaint (the “Amended 

Complaint”). Merck & Co., Inc. v. Bayer AG, C.A. No. 2021-0838-NAC, Docket (“Dkt.”) 

2 (“Amended Compl.”). In addition, copies of the SAPA, relevant sections of the Merck 

disclosure schedule, and the assumption agreement were attached as Exhibits A, B, and C, 

respectively, to Bayer’s Opening Brief in Support of its Motion to Dismiss. Dkt. 17 

(“Bayer’s OB”). The SAPA, disclosure schedule, and assumption agreement are 

incorporated by reference into the amended complaint. See Wal-Mart Stores, Inc. v. AIG 

Life Ins. Co., 860 A.2d 312, 320 (Del. 2004) (noting that on a motion to dismiss, the Court 

may consider documents that are “incorporated by reference” or “integral” to the 

complaint).
3

product lines, including the Dr. Scholl’s and Lotrimin foot powder product lines. 

The transaction closed on October 1, 2014 (the “Closing Date”). 

The SAPA includes liability and indemnification provisions addressing each 

party’s responsibility for, among other things, consumer tort litigation and claims 

alleging injury relating to advertising of products or arising from consumer 

protection laws (the “Product Claims”). Both Merck and Bayer have been the 

subject of lawsuits alleging injuries arising from consumers’ use of talc-based 

products, including products from the Dr. Scholl’s product line. Merck asserts that

its liability for Product Claims related to products sold prior to the Closing Date was 

time-limited and transferred to Bayer on October 1, 2021. 

Since the Closing Date, Bayer has tendered Product Claims to Merck pursuant 

to Section 2.7(d) of the SAPA. Merck has conditionally accepted Bayer’s tenders 

of Products Claims, while reserving all its rights. Merck has been defending the 

Product Claims tendered by Bayer and has paid the defense and liability costs 

associated with such Product Claims. Bayer did not participate in defending these 

Product Claims.

On January 4, 2021, Merck sent a letter to Bayer advising Bayer that “Merck 

will cease accepting tenders from Bayer of all product-related claims, including but 

not limited to all Product Claims, under Section 2.7(d) as of 5:00 p.m. (Eastern 
4

Daylight Time) on October 1, 2021[.]”2

 Between January and September 2021, 

Merck and Bayer engaged in conversations regarding the potential transition of 

responsibility for, and coordination of the defense of, the Product Claims from 

Merck to Bayer. On September 15, 2021, Bayer asserted that Merck’s liability for 

the Product Claims would not sunset; consequently, discussions regarding the 

transfer of liabilities broke down.

Merck sued Bayer on September 30, 2021, bringing claims for injunctive 

relief, specific performance, declaratory judgment, and breach of contract. All of 

Merck’s claims are predicated on Bayer’s alleged breach of the SAPA by refusing 

to assume liability for the Product Claims. The specific provisions of the SAPA 

relevant to Merck’s claims are Articles II and X.

Article II of the SAPA contains two sections apportioning liability among the 

parties. Section 2.6 provides as follows:

2.6. Assumption of Liabilities. Effective as of the Closing, neither 

Seller nor any of its Affiliates shall have any liability or obligation with 

respect to, and Buyer shall assume and thereafter pay, perform and discharge 

when due, all liabilities and obligations of Seller and its Affiliates, whether 

relating to periods prior to, on, or after the Closing, to the extent related to or 

arising from, the Transferred Consumer Care Assets, the Consumer Care 

Business, the Transferred Rx Product Assets, the Rx Product Business and/or 

the Conveyed Sites, other than the Retained Liabilities (collectively, the 

“Assumed Liabilities”) (provided that, notwithstanding anything to the 

contrary in this Section 2.6, (i) any liabilities or obligations of the Companies 

or any of their Subsidiaries shall not constitute Assumed Liabilities, it being 

2 Amended Compl. ¶ 27. 
5

acknowledged and agreed that such liabilities or obligations (other than 

Retained Liabilities) shall remain the liabilities or obligations, as applicable, 

of the Companies or their applicable Subsidiaries immediately after the 

Closing, and (ii) nothing in this Section 2.6 shall affect Buyer’s rights pursuant 

to Article X), including, without limitation: . . . (e) any obligations or liabilities 

to the extent relating to the Consumer Care Business in connection with any 

Litigation, other than Retained Liabilities; . . . and (h) the obligations and 

liabilities set forth in Section 2.6(h) of the Seller Disclosure Schedule.3

In layman’s terms, Bayer agreed to assume liability for all business lines acquired 

from Merck other than the “Retained Liabilities.” Section 2.7 sets forth the liabilities 

retained by Merck:

2.7. Retained Liabilities. Seller shall, without any further responsibility 

or liability of, or recourse to, Buyer, or any of Buyer’s directors, shareholders, 

officers, employees, agents, consultants, representatives, Affiliates, 

successors or assigns (including the Companies and their Subsidiaries), 

absolutely and irrevocably assume and be solely liable and responsible for the 

following obligations and liabilities (the “Retained Liabilities”); it being 

understood that nothing in this Section 2.7 shall affect Buyer’s rights pursuant 

to Article X: (a) all obligations and liabilities to the extent relating to or arising 

out of the Retained Assets; (b) any Taxes for which Seller is responsible under 

Section 6.1 of this Agreement; (c) all obligations and liabilities for which 

Seller or its Affiliates are made responsible pursuant to the terms of this 

Agreement or the Ancillary Documents; (d) the obligations and liabilities set 

forth in Section 2.7(d) of the Seller Disclosure Schedule (the “Section 2.7(d) 

Liabilities”); and (e) the China Obligations.4

Section 2.7(d) of the Seller Disclosure Schedule includes as “Retained Liabilities” 

the following items:

3 Bayer’s OB, Ex. A (“SAPA”) § 2.6. Merck is defined as the “Seller” and Bayer is defined 

as the “Buyer” under the SAPA.

4 Id. § 2.7.
6

1. Any product liability or similar claim for injury to a Person or property 

that allegedly arises out of or is based upon any express or implied 

representation, warranty, agreement or guaranty made by the Transferred 

Business, Seller or its Affiliates, or any of the Companies or their 

Subsidiaries, or by reason of the alleged improper performance or 

malfunctioning of a product, improper design or manufacture, failure to 

adequately package, label or warn of hazards or other related product 

defects of any products at any time manufactured, marketed or sold by the 

Companies or their Subsidiaries or otherwise in connection with the 

Transferred Business, in each case to the extent arising out of or relating 

to periods prior to the Closing.

2. Any liability or obligation of the Transferred Business, Seller or any of its 

Affiliates, or any of the Companies or their Subsidiaries, which is related 

to or associated with the failure, alleged failure or purported failure of a 

product to comply with applicable labeling, false or misleading advertising 

or consumer protection Laws, including California’s Proposition 65 

(California Health & Safety Code Section 25249.6 et. seq.), in each case 

to the extent arising out of or relating to periods prior to the Closing.5

In sum, pursuant to Section 2.7, Merck “absolutely and irrevocably” retained “all 

obligations and liabilities” for product liability claims related to the product lines 

acquired by Bayer, including the Dr. Scholl’s product line, to the extent such claims 

arise out of or relate to periods prior to the Closing Date.

Article X contains the relevant provisions governing indemnification and 

survivability. Section 10.1 provides as follows:

10.1. Expiration of Representations and Warranties; Indemnification 

Obligations. All of the representations and warranties of the parties set forth 

in this Agreement shall terminate and expire, and shall cease to be of any force 

or effect, at 5:00 P.M. (Eastern time) on the date that is the twelve (12) month 

anniversary of the Closing Date . . . and, in each case, all liability and 

5 Bayer’s OB, Ex. B (“Section 2.7(d) Seller Disclosure Schedule”) ¶ 1–2. The Section 

2.7(d) Seller Disclosure Schedule contains a third item that it is not at issue in this matter.
7

indemnification obligations with respect to such representations and 

warranties shall thereupon be extinguished (except to the extent a claim for 

indemnification has been validly made prior to such time for any breach 

thereof). All liability and indemnification obligations with respect to the 

Section 2.7(d) Liabilities shall survive until 5:00 P.M. (Eastern time) on the 

date that is the seventh (7th) anniversary of the Closing Date (except that all 

liability and indemnification obligations with respect to the third item set forth 

in Section 2.7(d) of the Seller Disclosure Schedule shall survive until 5:00 

P.M. (Eastern time) on the date that is the tenth (10th) anniversary of the 

Closing Date), in each case except to the extent a claim for indemnification 

has been validly made prior to such time.6

Section 10.2 provides as follows:

10.2. Indemnification.

Except with respect to indemnification for Taxes, which is governed 

exclusively by Article VI (other than indemnification for Losses in respect of 

Taxes arising out of the failure of the representations made by Seller in 

Section 3.17(d), (f), (g) and (h) of this Agreement to be true, complete and 

accurate as of the Closing Date, which indemnification is governed 

exclusively by this Section 10.2): . . .

(b) By Seller. From and after the Closing, Seller agrees to indemnify, defend 

and hold harmless Buyer, its Affiliates (including, for the avoidance of doubt, 

each Company and any Subsidiary of a Company), and their respective 

officers, directors, employees, members, partners, agents, representatives, 

successors and assigns (collectively, “Buyer Indemnitees”) from and against 

all Losses7 imposed on, incurred by or asserted against any of Buyer 

6 SAPA § 10.1.

7 “Losses” is defined in the SAPA to mean “all claims, losses, liabilities, damages, actions, 

suits, proceedings, payments, judgments, settlements, assessments, deficiencies, interest, 

penalties, costs and expenses, including, without limitation, removal costs, remediation 

costs, closure costs, fines, expenses of investigation and ongoing monitoring, reasonable 

attorneys’ fees and disbursements, provided, that (i) Losses shall not include punitive 

damages unless such Loss is payable by an Indemnitee to a third party in connection with 

any third party claim relating to any matter for which such Indemnitee is entitled to 

indemnification hereunder, (ii) for purposes of computing Losses imposed on, incurred by 

or asserted against an Indemnitee, there shall be deducted an amount equal to the amount 
8

Indemnitees arising out of or relating to: (i) the failure of any representation 

or warranty made by Seller in this Agreement . . . to be true, complete and 

accurate as of the Closing Date, (ii) any breach of any covenant or agreement 

of Seller contained in this Agreement, (iii) the Retained Assets and/or the 

Retained Liabilities (other than Section 2.7(d) Liabilities), (iv) the Section 

2.7(d) Liabilities or (v) the failure of any representation or warranty made by 

Seller in Sections 3.10(b) and (c) (Sufficiency of Transferred Assets) to be 

true, complete and accurate as of the Closing Date. 

. . . 

(f) Exclusive Remedies Following the Closing Date. Following the 

Closing Date, except for claims based on fraud against the party allegedly 

committing the fraud, the indemnification provisions of this Article X shall be 

the sole and exclusive remedy of the Indemnitees, whether in contract, tort or 

otherwise, for all matters arising under or in connection with this Agreement 

and the Contemplated Transactions, including, without limitation, for any 

inaccuracy or breach of any representation, warranty, covenant or agreement 

set forth herein and with respect to any matters or claims arising under 

Environmental Laws, and Buyer and its successors and assigns hereby waive, 

and unconditionally release Seller and its Affiliates from, any rights and 

remedies that Buyer and its successors and assigns may otherwise have 

against Seller or any of its Affiliates under any Environmental Law, including, 

without limitation, any claims for contribution under CERCLA or common 

law. Notwithstanding the foregoing, the parties shall also be entitled to all 

rights and remedies under Article VI and Sections 12.15 and 12.16.8

of any insurance proceeds, indemnification payments, contribution payments and 

reimbursements, and Tax benefits, actually received by such Indemnitee or any of such 

Indemnitee’s Affiliates in connection with such Losses or the circumstances giving rise 

thereto and (iii) any Losses in the nature of ‘lost revenues’ or ‘lost profits’ incurred by an 

Indemnitee shall be calculated only as an amount corresponding dollar-for-dollar to the 

actual amount of lost revenues or lost profits, not a multiple of such lost revenues or lost 

profits.” Id. § 1.1.

8 Id. § 10.2. Article VI addresses tax matters. Id. Art. VI. Section 12.15 provides, in part, 

that “each party shall be entitled to enforce the terms of this Agreement by a decree of 

specific performance[.]” Id. § 12.15. Finally, Section 12.16 sets forth terms regarding 

“Local Agreements” (e.g., bills of sale, assignment and assumption agreements, and similar 
9

In sum, this broad and complex provision governs the indemnification rights of each 

of Merck and Bayer.

Bayer has moved to dismiss the action under Court of Chancery Rule 12(b)(6) 

for failure to state a claim upon which relief can be granted.9

 A hearing on Bayer’s 

motion to dismiss was held on December 19, 2022.

II. ANALYSIS

The dispute between the parties concerns an interpretation of the contractual 

language in the SAPA and related documents. Both Bayer and Merck agree that the 

SAPA is unambiguous, though the parties disagree as to the proper interpretation of 

the SAPA. Merck contends that all Section 2.7(d) Liabilities transferred from Merck 

to Bayer on October 1, 2021, based on language included in Section 10.1. In 

contrast, Bayer argues that the language of Sections 2.6 and 2.7 unambiguously 

provides that Merck retains the Section 2.7(d) Liabilities forever and that the 

language Merck relies upon in Section 10.1 deals with separate indemnification 

rights.

As set forth below, the interpretation offered by Bayer is the only reasonable 

one, and, therefore, Merck’s complaint must be dismissed.

instruments) that the parties agreed to enter to transfer title to certain stock and assets. Id.

§§ 1.1, 12.16.

9 Dkt. 6 (“Mot. to Dismiss”).
10

A. Legal Standard

In considering Bayer’s motion to dismiss under Rule 12(b)(6), the standard is 

well-settled: 

(i) all well-pleaded factual allegations are accepted as true; (ii) even vague 

allegations are “well-pleaded” if they give the opposing party notice of the 

claim; (iii) the Court must draw all reasonable inferences in favor of the nonmoving party; and (iv) dismissal is inappropriate unless the plaintiff would 

not be entitled to recover under any reasonably conceivable set of 

circumstances susceptible of proof.10

“Under Delaware law, the proper interpretation of language in a contract is a 

question of law. Accordingly, a motion to dismiss is a proper framework for 

determining the meaning of contract language.”11 Dismissal of a contract dispute 

under Rule 12(b)(6) is proper, however, “only if the defendants’ interpretation is the 

only reasonable construction as a matter of law.”12

“When the contract is clear and unambiguous, [this Court] will give effect to 

the plain meaning of the contract’s terms and provisions.”13 This Court interprets 

contracts “as a whole and [gives] each provision and term effect, so as not to render 

10 Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (quotations omitted).

11 Majkowski v. Am. Imaging Mgmt. Servs., LLC, 913 A.2d 572, 581 (Del. Ch. 2006).

12 VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 615 (Del. 2003) (emphasis 

omitted); see Vanderbilt Income & Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 

691 A.2d 609, 613 (Del. 1996) (“On a motion to dismiss for failure to state a claim, a trial 

court cannot choose between two differing reasonable interpretations of ambiguous 

documents.”) (citation omitted). 

13 Osborn v. Kemp, 991 A.2d 1153, 1159–60 (Del. 2010).
11

any part of the contract mere surplusage[.]”14 A contract will not be read “to render 

a provision or term meaningless or illusory.”15 “As a matter of black letter law, ‘all 

writings that are part of the same transaction are interpreted together.’”16

It is appropriate at the motion to dismiss stage to consider the commercial 

reasonableness of an interpretation offered by a party. Where an agreement is 

unambiguous, it should be “read in full and situated in the commercial context 

between the parties.”17 As our Supreme Court has stated, “interpretations that are 

commercially unreasonable or that produce absurd results must be rejected.”18 

14 In re Shorenstein Hays-Nederlander Theatres LLC Appeals, 213 A.3d 39, 56 (Del. 2019) 

(quoting Osborn, 991 A.2d at 1159).

15 Id. (quoting Osborn, 991 A.2d at 1159).

16 Fla. Chem. Co., LLC v. Flotek Indus., Inc., 262 A.3d 1066, 1081 (Del. Ch. 2021) (quoting 

RESTATEMENT (SECOND) OF CONTRACTS § 202(2)).

17 Chi. Bridge & Iron Co. N.V. v. Westinghouse Elec. Co. LLC, 166 A.3d 912, 926–27 (Del. 

2017).

18 Manti Hldgs., LLC v. Authentix Acq. Co., Inc., 261 A.3d 1199, 1211 (Del. 2021); see 

Osborn, 991 A.2d at 1160 (Courts should reject “an unreasonable interpretation [that] 

produces an absurd result or one that no reasonable person would have accepted when 

entering the contract”); see also IMO Ronald J. Mount 2012 Irrevocable Dynasty Trust 

U/A/D Dec. 5, 2012, 2017 WL 4082886, at *4 (Del. Ch. Sept. 7, 2017) (“[M]y task is to 

construe the contract according to the plain meaning of its terms, remaining mindful that 

my construction of each term must make sense when considering the contract as a whole.”) 

(citing Riverbend Cmty., LLC v. Green Stone Eng’g, LLC, 55 A.3d 330, 334-35 (Del. 

2012)).
12

B. The SAPA Allocated Liabilities In A Clear And Unambiguous 

Manner

As noted, the SAPA dealt with two distinct forms of liability. The first is 

potential substantive liability to third-party consumers, including judgments and 

settlements.19 The second is costs incidental to litigation—even if Bayer is not liable

to the third-party consumer that brought the suit.

20 With respect to the Product 

Claims, it is clear that Sections 2.6 and 2.7 deal with the first category of liabilities 

while Article X provides a separate and distinct right to contractual indemnification, 

including for losses Bayer might suffer that arise out of or relate to the Section 2.7(d) 

Liabilities that Merck retained.

The parties allocated the risk of substantive liability for Product Claims in 

Sections 2.6 and 2.7 of the SAPA. In Section 2.6, Bayer agreed to assume all 

liabilities other than specified Retained Liabilities.21 These Retained Liabilities 

were expressly laid out in Section 2.7, wherein Merck agreed to retain liability 

regarding Product Claims for products sold before the Closing Date but for which 

lawsuits are brought after the Closing Date.

22 The language in Section 2.7 is broad 

and unambiguous:

19 See Dkt. 33 (“Hr’g Tr.”) at 7.

20 Id.

21 SAPA § 2.6.

22 Id. § 2.7
13

[Merck] shall, without any further responsibility or liability of, or recourse to, 

[Bayer] . . . absolutely and irrevocably assume and be solely liable and 

responsible for the following obligations and liabilities (the “Retained 

Liabilities”); it being understood that nothing in this Section 2.7 shall affect 

[Bayer’s] rights pursuant to Article X: . . . Any product liability or similar 

claim for injury to a Person or property that allegedly arises out of . . . the 

Transferred Business . . . in each case to the extent arising out of or relating 

to periods prior to the Closing.23

Merck contends that the parties would have used words like “perpetual” or 

“forever” if Merck had in fact agreed to retain the Section 2.7(d) Liabilities 

indefinitely.24 But the words used by the parties establish exactly this form of 

agreement. Turning to Black’s Law Dictionary, both “absolute” and “irrevocable” 

encompass the idea of unreserved commitment.25 This unambiguous language 

establishes Merck’s obligation to retain liability for Product Claims associated with 

talc products sold prior to the Closing Date indefinitely. I could arguably end my

23 Id. This version of Section 2.7(d) has been modified for clarity, with emphasis added. 

The portion before the colon is from the SAPA. The portion after the colon is from Section 

2.7(d) of the disclosure schedule. See Section 2.7(d) Seller Disclosure Schedule ¶ 1. The 

unmodified version of Section 2.7(d) and the relevant language from the disclosure 

schedule is set forth in Section I.

24 Amended Compl. ¶ 21 Merck also argues that I should view its “absolute[] and 

irrevocabl[e]” assumption in Section 2.7(d) as just meaning that it “absolutely and 

irrevocably” assumes only those Product Claims tendered to it by Bayer. Dkt. 19 

(“Merck’s AB”) at 20. However, this interpretation is not supported by the plain language 

of Section 2.7, which makes no distinction as to Product Claims tendered to Merck.

25 Absolute, BLACK’S LAW DICTIONARY (11th ed. 2019) (“Free from restriction, 

qualification, or condition; Conclusive and not liable to revision.”); Irrevocable, BLACK’S 

LAW DICTIONARY (11th ed. 2019) (“Unalterable; committed beyond recall.”). See 

Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 738 (Del. 2006) (“Under wellsettled case law, Delaware courts look to dictionaries for assistance in determining the plain 

meaning of terms which are not defined in a contract.”).
14

analysis here, but further reasons compel this Court to conclude that Bayer’s 

interpretation is the only reasonable one.

C. Merck’s Attempt To Shoehorn The Indemnification Provision’s 

Sunset Into Section 2.7 Fails As A Matter Of Law

Merck argues that Section 10.1 must be read as imposing a time limit on 

Merck’s obligations under Section 2.7 to defend the Product Claims relating to 

products sold prior to the Closing Date.26 Per Merck, a failure to interpret the SAPA 

in this manner would contradict the principle that contracts be “read as a whole, 

giving meaning to each term.”27 But a plain reading of Article X of the SAPA clearly 

establishes that Merck’s interpretation is incorrect.

While substantive third-party liability was apportioned in Sections 2.6 and 

2.7, Article X addresses the separate and distinct issue of various, limited contractual

indemnification rights belonging to Merck and Bayer vis-à-vis each other. In 

addition, Article X sets forth time limits on these contractual indemnification rights, 

as well as the SAPA’s representations and warranties.28 What Article X does not do 

is extinguish the underlying liability for third-party claims. Indeed, Article X cannot 

26 Merck’s AB at 17–19.

27 Merck’s AB at 18 (quoting Sunline Com. Carriers, Inc. v. CITGO Petroleum Corp., 206 

A.3d 836, 846 (Del. 2019)).

28 See SPay, Inc. v. Stack Media Inc., 2021 WL 6053869, at *5–7 (Del. Ch. Dec. 21, 2021) 

(discussing contractual terms used to deviate the survival period of certain representations 

and warranties from the three-year statutory limitations period)
15

do this, since it addresses purely contractual rights between Merck and Bayer and 

has no bearing on the tort claims of third-party consumers who are not party to the 

SAPA.

Under Section 10.2, Merck agreed to “indemnify, defend and hold harmless 

[Bayer] . . . from and against all Losses imposed on, incurred by or asserted against 

[Bayer] arising out of or relating to: . . . (iv) the Section 2.7(d) Liabilities[.]”29 

Section 10.2 contained similar obligations undertaken by Merck to “indemnify, 

defend and hold harmless [Bayer]” for the failure of any representation to be true, 

complete, and accurate and for any breach of any covenant or agreement made by 

Merck in the SAPA.30

Section 10.1 (“Expiration of Representations and Warranties; Indemnification 

Obligations”) discusses the survival of these obligations:

All of the representations and warranties of the parties set forth in this 

Agreement shall terminate and expire, and shall cease to be of any force or 

effect, at 5:00 P.M. (Eastern time) on the date that is the twelve (12) month 

anniversary of the Closing Date . . . and, in each case, all liability and 

indemnification obligations with respect to such representations and 

warranties shall thereupon be extinguished (except to the extent a claim for 

indemnification has been validly made prior to such time for any breach 

thereof). All liability and indemnification obligations with respect to the 

Section 2.7(d) Liabilities shall survive until 5:00 P.M. (Eastern time) on the 

date that is the seventh (7th) anniversary of the Closing Date . . . in each case 

29 SAPA § 10.2(b).

30 Id.
16

except to the extent a claim for indemnification has been validly made prior 

to such time.

31

Merck rests its case entirely on the presence of the phrase “all liability” in Section 

10.1. Per Merck, the definitions of “all” and “liability” are broad.32 Merck asserts 

that the inclusion of “liability” contrasted with the word “indemnification” 

unambiguously demonstrates the parties’ intent to sunset Merck’s obligations as to 

the Retained Liabilities on the seventh anniversary of the Closing Date and transfer 

them entirely to Bayer.33 Merck argues that a contrary reading would render the 

term “liability” superfluous.34 This is a red herring. 

Merck’s argument fails, as its interpretation would result in “an implausibly 

circuitous and tortured means of implementing” the SAPA.35 Considering the SAPA 

as a whole, there is no circumstance in which it is reasonable to read Section 10.1’s

reference to “liability” in Merck’s favor.36

31 Id. § 10.1 (emphasis added).

32 Merck’s AB at 21–22 (citing Lorillard Tobacco, 903 A.2d at 738).

33 Id. at 21–23. 

34 Id. at 17–19. At oral argument, Bayer’s counsel offered that, while giving independent 

meaning to Section 10.1’s reference to “liability” is unnecessary to grant Bayer’s motion, 

its inclusion is directed to the foreclosure of certain arguments based on common law. Hr’g 

Tr. at 63-64.

35 White v. Curo Tex. Hldgs., LLC, 2017 WL 1369332, at *15 (Del. Ch. Feb. 21, 2017).

36 The phrase “all liability and indemnification obligations” appears more than once in 

Section 10.1. As Bayer’s counsel noted at oral argument, Merck’s position would impose 

materially different meanings on the first and second appearances of the phrase despite 

their being used in near-immediate succession in Section 10.1. Hr’g Tr. at 30–31.
17

Indeed, if I were to adopt Merck’s advocated interpretation of Section 10.1, 

that approach would lead, at most, only to the absurd conclusion that, after seven 

years, the pool of Section 2.7(d) Liabilities retained by Merck simply “expires.” 

Merck avers that upon this “expiration” the Section 2.7(d) Liabilities become 

Bayer’s, but there is no mechanism in the SAPA by which these liabilities would be 

transferred upon expiration. And it does not make sense to say that the third-party 

tort claims that comprise the Section 2.7(d) Liabilities would “expire” after seven 

years. As highlighted by Bayer, Merck and Bayer have no power to extinguish 

liability for the Product Claims, which are tort claims brought by third parties that 

were not parties to the SAPA.37 The fact that Merck and Bayer agreed to an 

expiration of mutually agreed contractual liabilities in Article X has no bearing on 

the allocation of third-party tort liability set forth in Section 2.7.

Furthermore, and contrary to Merck’s assertions, it is not reasonable to read a 

single word in Section 10.1 as unwinding the thoroughly assigned liabilities within 

Sections 2.6 and 2.7. Nowhere in Sections 2.6 or 2.7 is there language supporting 

Merck’s claim that the inclusion of the word “liability” in the SAPA’s 

indemnification provision was intended to negate the parties’ careful allocation of 

37 See Bayer’s OB at 26–27.
18

liability for Product Claims. Rather, Section 2.7 specifically provides that it 

concerns rights separate from Bayer’s indemnification rights under Article X.38 

Had the parties intended to impose the time limits set forth in Section 10.1 on 

the Section 2.7(d) Liabilities, then one would expect explicit language to that effect. 

Instead, the parties expressly stated that “nothing in this Section 2.7 shall affect 

[Bayer’s] rights pursuant to Article X.”39 As this Court has stated, “to express or 

include one thing implies the exclusion of the other.”40 That the parties explicitly 

reference Article X in Section 2.7 without stating that the time limits in Section 10.1

are applicable to Section 2.7 provides further clear evidence that these provisions 

deal with wholly separate issues. The “circuitous and tortured” implied time limit 

that Merck urges contradicts the SAPA’s plain meaning and must be rejected.

In addition, Section 10.2(f) states that “the indemnification provisions of this 

Article X shall be the sole and exclusive remedy” of the parties.41 The plain text of 

this provision is yet further confirmation that the provisions of Article X are directed 

38 See SAPA §§ 2.6, 2.7; Section 2.7 states “nothing in this Section 2.7 shall affect Buyer’s 

rights pursuant to Article X[.]” Id. § 2.7.

39 Id. § 2.7.

40 Fortis Advisors LLC v. Shire US Hldgs., Inc., 2017 WL 3420751, at *8 (Del. Ch. Aug. 

9, 2017).

41 Quite notably, while Article X places time limits on various indemnification rights found 

in that portion of the SAPA, the parties’ rights to specific performance of the SAPA are 

found elsewhere, in Section 12.15, and are expressly carved-out from Section 10.2(f)’s 

exclusive remedies. As Bayer thus states, its right to obtain specific performance of 

Merck’s retention of Section 2.7(d) Liabilities remains on-going. Bayer’s OB at 32–33.
19

to questions of contractual indemnification and, in no event, effectuate an absurd, 

one-word transfer of Section 2.7(d) Liabilities from Merck to Bayer. 

D. Case Law Further Supports Bayer’s Interpretation

Bayer’s interpretation is bolstered by case law, and Merck’s attempts to 

distinguish this relevant precedent fail. In seeking dismissal, Bayer points to JFE 

Steel Corp. v. ICI Americas, Inc. In JFE Steel, the U.S. District Court for the District 

of Delaware addressed which party to an asset purchase agreement was responsible 

for certain environmental clean-up costs associated with land sold under the 

agreement.42 The seller under the agreement argued that the time limit on 

indemnification meant that it “would retain liability for pre-closing environmental 

liabilities for a period of ten years[.]”43 The JFE Steel court rejected the seller’s 

argument because it confused two distinct provisions of the agreement.44 One 

provision provided that indemnification obligations would survive for ten years, 

while another provision provided that the seller would retain certain liabilities 

indefinitely, including liabilities associated with environmental cleanup.

45

42 JFE Steel Corp. v. ICI Ams., Inc., 797 F.Supp.2d 452, 455–57 (D. Del. 2011).

43 Id. at 460.

44 Id. at 470.

45 Id.
20

Accordingly, the court enforced the seller’s agreement regarding the retained 

liabilities.46

Bayer asserts that this case is applicable because, in Section 2.7, Merck agreed 

to be solely liable for specified Retained Liabilities indefinitely, and this duty is 

separate and in addition to Merck’s obligations found in Article X.

47 Merck attempts 

to distinguish this case by contrasting the language of the agreements.48 Merck

argues that the agreement in JFE Steel provided only for the expiration of 

“indemnification” while the SAPA provided for the expiration of “all liability and 

indemnification obligations.”49 As discussed above, this distinction is not 

meaningful—the language “all liability” in Section 10.1 was meant to cover all 

contractual obligations created by Article X rather than reapportion liabilities 

allocated in Sections 2.6 and 2.7. 

Bayer likewise relies on applicable persuasive precedent found in Alexander 

& Baldwin, Inc. v. C&H Sugar Co., Inc.50 In that role-reversed situation, the buyer 

agreed to assume certain liabilities indefinitely and to indemnify the seller for these 

46 Id.

47 Bayer’s OB at 23–24.

48 Merck’s AB at 24–25.

49 Id.

50 Bayer’s OB at 24.
21

assumed liabilities for a period of two years.51 Following the lapse of the buyer’s 

indemnification obligations, the buyer asserted that itsresponsibility for the assumed 

liabilities had terminated.52 The court disagreed with the buyer, finding that the 

indemnification obligations were in addition to its duty to “assume, perform, and 

timely pay and discharge” the assumed liabilities.53

Bayer analogizes Alexander & Baldwin to this case, noting that while Merck’s 

Article X obligations expired on October 1, 2021, the separate duty to “absolutely 

and irrevocably assume and be solely liable and responsible for” the Retained 

Liabilities has no expiration.54 Merck attempts to distinguish this persuasive 

analysis by focusing on an entirely separate portion of the court’s opinion that is 

inapplicable to this present case.55 Unsurprisingly, I reject Merck’s argument and 

note that Merck has not identified any significant distinguishing facts between this 

case and Alexander & Baldwin.

51 Alexander & Baldwin, Inc. v. C&H Sugar Co., Inc., 2009 WL 10671790, at *2–3 (C.D. 

Cal. Aug. 3, 2009).

52 Id. at *3.

53 Id. at *4.

54 Bayer’s OB at 25.

55 See Merck’s AB at 25 (focusing on the court’s 12(b)(6) analysis, which concerned an 

interpretation of the preposition “as of,” and ignoring the court’s ripeness analysis, which 

discussed and rejected the defendant’s argument that the time limit in the indemnification

provision also time limited the defendant’s commitment to assume product liabilities).
22

Accordingly, I agree with Bayer that the holdings in JFE Steel and Alexander 

& Baldwin are on-point and applicable: Where a party has agreed to assume or retain 

certain liabilities indefinitely, it cannot escape its obligations through the expiration 

of related indemnification obligations.

E. Merck’s Remaining Arguments Concerning Contract 

Interpretation Fail

Merck attempts to rescue its claims through two alternative arguments. First, 

Merck argues that the “specific” language in Section 10.1 must control over the 

“general” language in Section 2.7.56 Second, Merck argues that extrinsic evidence 

supports its interpretation and that, to the extent that I find the SAPA ambiguous, the 

motion to dismiss must be denied.57 I reject both arguments.

1. The General/Specific Canon Is Inapplicable Because 

Sections 2.7 And 10.1 Are Not In Conflict

Merck argues that I must apply the canon of contract construction that a 

contract’s specific language controls over the contract’s general language.58 In so 

arguing, Merck cites to our Supreme Court’s opinion in DCV Holdings, Inc. v. 

ConAgra, Inc. for the proposition that “[s]pecific language in a contract controls 

over general language, and where specific and general provisions conflict, the 

56 Id. at 20–21.

57 Id. at 30–35.

58 Id. at 20–21.
23

specific provision ordinarily qualifies the meaning of the general one.”59 Merck

contends that “the general language of Section 2.7 providing that Merck will retain 

Section 2.7(d) Liabilities is qualified by the specific language in Section 10.1 which 

provides that Merck will retain said liability only for a period of seven years.”60

Merck’s argument fails. As established in each of the cases cited by Merck, 

the general/specific canon applies only where specific and general provisions 

conflict.

61 As explained above, Section 2.7 and Section 10.1 are not in conflict—

instead, these provisions deal with entirely distinct issues. In fact, Merck’s argument 

is undercut by one of the very cases it relies upon, Kan-Di-Ki, LLC v. Suer. 

In Kan-Di-Ki, the plaintiff argued that a longer time limit applicable to the 

survival of representations, warranties, covenants, and agreements within an asset 

purchase agreement should be applied to that same agreement’s non-competition 

59 889 A.2d 954, 961 (Del. 2005).

60 Merck’s AB at 21.

61 See, e.g., DCV Hldgs., Inc., 889 A.2d at 959–962 (affirming the Superior Court’s finding 

that a general representation by Seller that there were no undisclosed liabilities was in 

conflict with a more specific representation that the Seller was in compliance with all laws); 

Pilot Air Freight, LLC v. Manna Freight Sys., Inc., 2020 WL 5588671, at *12–13 (Del. 

Ch. Sept. 18, 2020) (holding that the more specific 15-month indemnification survival 

period qualified the general 3-year indemnification period); Kan-Di-Ki, LLC v. Suer, 2015 

WL 4503210, at *23–25 (Del. Ch. July 22, 2015) (rejecting plaintiff’s attempt to apply a 

general time limit on the survival of representations, warranties, covenants and agreements 

under an asset purchase agreement to a more specific time limit on the survival of a noncompete provision within that same agreement).
24

provision, which was subject to a shorter survival period.62 As noted by Merck, this 

Court dismissed this argument because the interpretation the plaintiff put forth 

“artificially put[] [the two sections at issue] in conflict with one another, such that 

one or the other would contain a meaningless provision.”63 This is exactly what 

Merck attempts to do here. Adopting Merck’s interpretation would artificially put 

Section 2.7 and Section 10.1 in conflict and would render Merck’s commitment to 

retain the Section 2.7(d) Liabilities “absolutely and irrevocably” meaningless. 

2. The Relevant Provisions Of The SAPA Are Not Ambiguous

Merck agrees with Bayer that the SAPA is unambiguous.64 However, Merck 

contends that “to the extent that there is any ambiguity, the parties’ conduct 

following the formation of the SAPA” supports Merck’s interpretation.65 To begin, 

I do not find that the relevant provisions of the SAPA are ambiguous, and 

“[e]xtrinsic, parol evidence cannot be used to manufacture an ambiguity in a 

contract that facially has only one reasonable meaning.’”66 Where, as here, the 

62 Kan-Di-Ki, LLC, 2015 WL 4503210, at *24.

63 Merck’s AB at 21 (citing Kan-Di-Ki, LLC, 2015 WL 4503210, at *24).

64 See Bayer’s OB at 35 (“The SAPA is unambiguous[.]”); Merck’s AB at 35 (“[T]he SAPA 

is not ambiguous[.]”); Dkt. 21 (“Bayer’s RB”) at 18 (“[T]he relevant provisions of the 

SAPA are not ambiguous[.]”). See also Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 

381, 385 (Del. 2012) (“Contract language is not ambiguous merely because the parties 

dispute what it means.”).

65 Merck’s AB at 30–35.

66 United Rentals, Inc. v. RAM Hldgs., Inc., 937 A.2d 810, 830 (Del. Ch. 2007).
25

“contract is unambiguous, extrinsic evidence may not be used to interpret the intent 

of the parties, to vary the terms of the contract or to create an ambiguity.”67

But, even if I could consider extrinsic evidence in this context, the extrinsic 

evidence to which Merck points as potentially illuminating instead reinforces the 

deficiency of its position. Merck contends that the parties’ post-closing conduct 

supports its interpretation. Merck points to two categories of post-closing conduct. 

First, Merck highlights its retention of all Product Claims for seven years following 

the Closing Date.

68 Second, Merck points to its discussions with Bayer between 

January 2021 and September 2021, where Merck stated its intention to transfer the 

Product Claims to Bayer.69 Per Merck, this conduct “confirms the parties’ intent 

that Merck’s liability under Section 2.7(d) would sunset on October 1, 2021.”70

It is illuminating what evidence Merck does not point to—extrinsic evidence 

regarding the negotiation or drafting of the SAPA. Instead, Merck relies solely on 

evidence of the parties’ actions after the Closing Date. While such overt statements 

and acts may be relevant in interpreting an ambiguous contract, a primary tenet of 

the parol evidence rule is that “relevant extrinsic evidence is that which reveals the 

67 Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997)

68 Merck’s AB at 31–33.

69 Id.

70 Id. at 33.
26

parties’ intent at the time they entered into the contract.”71 Given this, “backwardlooking evidence gathered after the time of contract is not usually helpful.”72

Even accepting these allegations as true (as I must), and even assuming for 

the sake of argument that the terms at issue are ambiguous (they are not), the 

evidence to which Merck points is unlikely to be relevant. Indeed, it is hard to see 

how these discussions, which occurred six years after the negotiation of the SAPA, 

would be helpful in determining the meaning of the provisions at issue. 

F. The Commercial Context Of The SAPA Supports Bayer’s Position

While a plain reading of the SAPA’s terms and relevant case law compel

dismissal, the SAPA’s basic commercial context further reinforces this conclusion. 

In other words, what the SAPA’s unambiguous language suggests, its basic 

commercial context confirms. Thus, considering the SAPA’s commercial context, 

and the structure of the transaction, I am further convinced that Bayer’s 

interpretation is the only reasonable one.

1. Merck’s Interpretation Is Commercially Unreasonable

As highlighted by Bayer, Merck’s interpretation of the SAPA would be 

commercially unreasonable because it would allow Merck to dump all pending but 

71 Eagle Indus., Inc., 702 A.2d at 1233 n.11 (emphasis in original).

72 Id. (citation omitted).
27

untendered cases involving Product Claims onto Bayer on October 1, 2021.73 This 

means that Merck and its counsel could make all strategic decisions in litigating the 

Product Claims—including whether to settle Product Claims and the terms of such 

settlement—without input from Bayer.74 In addition, in this scenario, Merck would 

be incentivized to stretch out or stall litigation of the Product Claims with the goal 

of shifting ultimate liability to Bayer.

In response, Merck argues that its interpretation would only shift 

responsibility for Product Claims related to products sold prior to the Closing Date 

but brought after October 1, 2021.75 Merck contends that its interpretation would 

not have any impact on Product Claims validly tendered by Bayer before October 1, 

2021.76

Merck may be correct that its interpretation would not require Bayer to take 

on those Product Claims that have been tendered to Merck and are being actively 

litigated. Nonetheless, Merck’s interpretation would result in a situation whereby 

Merck could shift all liability for the products it sold prior to the Closing Date to 

Bayer.77 Nothing in the SAPA indicates that the parties intended Bayer to assume 

73 See Bayer’s OB at 30–32.

74 Id. at 31.

75 Merck’s AB at 27.

76 Id.

77 See Bayer’s RB at 16.
28

liability for all of Merck’s actions for the period during which it formulated, 

marketed, and sold the products that are now subject to the Product Claims. 

Furthermore, and as discussed in greater detail below, the SAPA contains no 

mechanism by which Bayer would assume the Section 2.7(d) Liabilities after the 

Closing Date. If the parties had intended for Bayer to assume the Section 2.7(d) 

Liabilities, then one would expect the SAPA to include mechanisms by which Bayer 

could, for example, exercise some degree of influence concerning the litigation of 

the relevant Product Claims. In addition, one would expect the parties to provide 

for something akin to a “Form of Assumption Agreement” for the Section 2.7(d) 

Liabilities as they did with respect to the liabilities assumed by Bayer at closing. 

However, no such mechanisms exist. In light of these considerations, Merck’s 

interpretation is not commercially reasonable.

2. The Structure Of The Transaction Supports Bayer’s 

Interpretation

Merck fails to explain how the language in Section 10.1 would transform its 

Retained Liabilities into Bayer’s Assumed Liabilities. Merck claims that Section 

10.1 governsthe survival of “all liability and indemnification obligations,” including 

liability for Product Claims.78 However, as a general matter, only parties privy to a 

78 Merck’s AB at 17–25.
29

contract can be bound by its terms.79 The only “liability and indemnification 

obligations” that could expire pursuant to the SAPA are those obligations created by 

the SAPA, namely, the indemnification obligations found in Section 10.2. 

Conversely, the Retained Liabilities are pre-existing liabilities involving numerous 

third parties and are merely allocated within the SAPA. These liabilities cannot be 

created or extinguished through the SAPA. Merck thus fails to demonstrate how its 

Retained Liabilities are extinguished.

Further, even if Merck could demonstrate a means by which its Retained 

Liabilities are extinguished, it fails to identify how the SAPA effectuated this 

transfer to Bayer. According to the SAPA, the initial transfer of liabilities from 

Merck to Bayer was accomplished through an “Assumption Agreement,” which was

a required closing deliverable.80 Pursuant to the Assumption Agreement, Bayer 

“assume[d] and agree[d] to pay, perform and discharge when due, without recourse 

79 See Alliance Data Sys. Corp. v. Blackstone Cap. P’rs V L.P., 963 A.2d 746, 760 (Del. 

Ch. 2009) (“Absent unusual circumstances not present here, the ordinary rule is that only 

the formal parties to a contract are bound by its terms.”). There are, of course, exceptions 

to this general rule. See, e.g., In re Shorenstein Hays-Nederlander Theatres LLC Appeals, 

213 A.3d 39, 57–58 (Del. 2019) (holding that contracts may impose obligations on 

affiliates of the contracting parties in certain contexts); Crispo v. Musk, 2022 WL 6693660, 

at *3–11 (Del. Ch. Oct. 11, 2022) (discussing when a third-party beneficiary to a contract 

may be entitled to enforce its rights under that contract); Fla. Chem. Co., LLC v. Flotek 

Indus., Inc., 262 A.3d 1066, 1089–96 (Del. Ch. 2021) (discussing when a non-signatory to 

a contract may be bound by a forum selection provision contained in the contract). None 

of these exceptions are applicable here.

80 SAPA §§ 8.6, 9.3; Ex. C to Bayer’s OB (“Assumption Agreement”).
30

to [Merck], the Assumed Liabilities and the Other Assumed Liabilities.”81 More 

damning to Merck’s argument is the next paragraph: 

[Merck] acknowledge[s] that, except as expressly set forth in the [SAPA], this 

Assumption Agreement and any Ancillary Document . . . [Bayer] and its 

Affiliates are not assuming or agreeing to pay, perform or discharge . . . any 

liability or obligation of Merck or any of its Affiliates other than the Assumed 

Liabilities and the Other Assumed Liabilities.82

Merck asserts that the language “except as expressly set forth in the [SAPA]” saves 

its argument.83

Merck is incorrect. First, Bayer’s assumption of the Section 2.7(d) Liabilities 

is not “expressly set forth” in the SAPA. As discussed above, only a contorted and 

fragmented reading of the SAPA could result in the transfer of Retained Liabilities 

under Section 10.1. Second, accepting Merck’s position would seemingly turn the 

Assumption Agreement into the contractual equivalent of a Rube Goldberg machine. 

It would be nonsensical for the parties to carefully allocate Retained and Assumed 

liabilities in Sections 2.6 and 2.7 and draft an Assumption Agreement effecting that 

allocation only to negate this entire structure through a single word in the 

indemnification section. Because the structure of the SAPA fails to allow for the 

extinguishment or transfer of the Retained Liabilities, Merck’s position must fail.

81 Assumption Agreement ¶ 1.

82 Id. ¶ 2.

83 Merck’s AB at 20.
31

In the alternative, Merck argues that Section 5.6 of the SAPA sets forth a 

procedure for shifting responsibility of the Product Claims.84 In addition, at the 

hearing on this motion, Merck argued for the first time that it did not make sense to 

read Section 10.2(b)(iv) as covering incidental litigation expenses because Section 

5.6(c) already covered such costs.85

This argument is unpersuasive and highlights Merck’s incongruous reading of 

the SAPA. Section 5.6 requires Bayer to maintain books and records of the acquired

businesses for a period of six years.86 Section 5.6(c) extends a further obligation to 

Bayer, requiring it to make those records and certain personnel available to Merck 

“in anticipation of, or preparation for, existing or future litigation with respect to the 

Transferred Businesses,” among other circumstances.87 Subsection (c) further 

provides that Merck will reimburse Bayer for the reasonable out-of-pocket costs 

associated with its Section 5.6 obligations.88

A correct reading of Section 5.6(c) illuminates the difference between 

Merck’s Section 5.6(c) rights and obligations and its other rights and obligations

under the SAPA. Under Section 5.6(c), Merck is allowed to make certain requests 

84 Id. At 27–29.

85 Hr’g Tr. At 72.

86 SAPA § 5.6.

87 Id. § 5.6(c).

88 Id.
32

in its litigation efforts, and it is obligated to reimburse Bayer for the costs of 

complying. Nothing in Section 5.6 can be read as setting forth the procedure for 

shifting liability for the Product Claims. Furthermore, Section 10.2 deals with costs 

that Bayer will incur, not in assisting Merck with its litigation, but as a result of 

having to participate in litigation for Product Claims retained by Merck. 

Consequently, Merck’s argument fails and further highlights Merck’s contorted 

reading of the SAPA.

3. Purchase Price Only Included The Assumed Liabilities As 

Consideration

Looking at the purchase price provision of the SAPA, I am further convinced 

that Merck’s position is untenable. Section 2.8 of the SAPA governs the purchase 

price of $14.2 billion agreed upon between the parties; this consideration is given by 

Bayer in exchange for the “Company Common Stock and the Transferred Assets, 

and the assumption of the Assumed Liabilities.”89 The explicit acknowledgement 

of the Assumed Liabilities as consideration contrasts with the absence of any 

mention of Bayer’s assumption of the Section 2.7(d) Liabilities. If these 

sophisticated parties intended for Bayer to eventually assume the Section 2.7(d) 

Liabilities retained by Merck, one would expect to see that transfer addressed as part 

89 SAPA § 2.8(a).
33

of the consideration as it was with the Assumed Liabilities. This absence further 

highlights the flaws with Merck’s argument.90

Accordingly, considering the commercial context, the structure of the 

transaction, and other provisions of the SAPA, Merck’s asserted interpretation of the 

SAPA must be rejected.

G. Merck’s Other Claims Fail

Merck includes two additional claims that were minimally briefed and are, 

frankly, somewhat difficult to understand.

First, Merck demands that Bayer reimburse it for losses of $6 million that 

Merck incurred in connection with litigating the Section 2.7(d) Liabilities.91 

Merck’s request is premised on its faulty argument that its obligation to cover the 

Section 2.7(d) Liabilities is subject to Article X.92 Merck relies on Section 10.2(c), 

which provides in relevant part that Merck “shall not be required to indemnify 

[Bayer] . . . with respect to any claim arising out of or relating to the matters 

described in Section 10.2(b)(iv), unless and until the aggregate Losses arising out of 

or relating to such matters exceed $25,000,000 (the ‘Section 2.7(d) Liabilities 

90 See also Bayer’s OB at 2 (“Merck’s retention of those product liabilities was a critical 

component of the consideration that Merck provided to Bayer[.]”).

91 Amended Compl. ¶¶ 57–66, Prayer for Relief.

92 See Merck’s AB at 36 (“Section 10.2 clearly and unambiguously provides for certain 

condition’s precedent prior to triggering Merck’s obligation to cover Section 2.7(d) 

Liabilities.”).
34

Deductible’)[.]”93 Merck contends that Bayer must reimburse Merck for the $6 

million in losses it incurred associated with the Section 2.7(d) Liabilities because 

these costs did not exceed $25 million.94

To begin Merck’s claim for reimbursement fails for the reasons already 

discussed—Merck “absolutely and irrevocably” agreed to “assume and be solely 

liable and responsible for” the Section 2.7(d) Liabilities “without any further 

responsibility or liability of, or recourse to, Bayer.”95 Considering the very minimal 

allegations and arguments offered by Merck, there is no reasonable construction of 

the SAPA under which Merck is entitled to reimbursement for the losses it incurred 

in connection with the Section 2.7(d) Liabilities for which it is solely liable.

Indeed, Merck points to no provision in the SAPA that sets forth the means 

through which such reimbursement would occur. As highlighted by Bayer, “[i]n 

Sections 10.2(a) and (b) of the SAPA, Merck and Bayer defined indemnification 

claims that one party could bring against the other but provided only Bayer with an 

indemnification right with respect to Section 2.7(d) Liabilities.”96 Although it is not 

93 Id. at 36–37 (quoting SAPA § 10.2(c)).

94 Id. at 37–38.

95 SAPA § 2.7.

96 Bayer’s OB at 34 (emphasis in original). Section 10.2(b) of the SAPA addresses Bayer’s 

indemnification rights and provides that, “[f]rom and after the Closing, [Merck] agrees to 

indemnify, defend and hold harmless [Bayer] . . . from and against all Losses imposed on, 

incurred by or asserted against [Bayer] arising out of or relating to: . . . (iv) the Section 
35

easy to discern, Merck appears to ground its argument in some sort of implicit 

indemnification obligation, but Section 10.2(a) and (b) establish that such an implicit 

obligation unambiguously does not exist.

Second, in briefest passing, Merck asserts that its alleged failure to cooperate 

claim was not the subject of Bayer’s motion to dismiss.97 This appears in a footnote

in Merck’s answering brief, and Merck’s counsel noted it briefly at oral argument.98 

Bayer unequivocally moved to dismiss the entirety of Merck’s complaint.99 If 

Merck intended to preserve this argument, it should have addressed it in a more 

meaningful way.100 Even assuming it was not waived, however, Bayer correctly 

points out that Merck’s allegations in support of this claim comprise a handful of 

legal conclusions.

101 At oral argument, Merck suggested that this claim should 

2.7(d) Liabilities.” SAPA § 10.2(b). Section 10.2(a) of the SAPA addresses Merck’s 

indemnification rights and includes no provision addressing the Section 2.7(d) Liabilities.

97 See Merck’s AB at 10 n.1 (“Although Merck believes Bayer’s contract interpretation 

fails and that the Motion to Dismiss should be denied on that basis alone, Merck has 

separately pled a breach of contract for Bayer’s failure to cooperate that does not hinge on 

that contract interpretation and thus is not subject to the pending Motion to Dismiss.”).

98 Id.; Hr’g Tr. at 50:7–51:2.

99 See Mot. to Dismiss; Bayer’s OB at 37 (“Merck’s Amended Complaint should be 

dismissed in its entirety with prejudice.”).

100 See In re Tesla Motors, Inc., S’holder Litig., 2018 WL 1560293, at *20 (Del. Ch. Mar. 

28, 2018) (“[F]ailure to raise a legal issue in the above-the-line text of a brief generally 

constitutes waiver of that issue.”).

101 Bayer’s RB at 22–23 (citing Amended Compl. ¶¶ 52, 68).
36

nonetheless be exempted from the application of Rule 15(aaa),102 but Merck chose 

to stand on its complaint and, as such, Rule 15(aaa) applies.103

III. CONCLUSION

For the foregoing reasons, Bayer’s motion to dismiss is GRANTED.

102 See Hr’g Tr. at 51:3–10.

103 See Braddock v. Zimmerman, 906 A.2d 776, 783 (Del. 2006).