Court Opinion

ID: 9959482
Source: CourtListenerOpinion
Date Created: 2024-04-11 19:02:54.320329+00
Date Added: 2024-06-11T08:18:20.148711
License: Public Domain

SUPERIOR COURT
                                                OF THE
                                     STATE OF DELAWARE

VIVIAN L. MEDINILLA                                                    LEONARD L. WILLIAMS JUSTICE CENTER
               JUDGE                                                   500 NORTH KING STREET, SUITE 10400
                                                                              WILMINGTON, DE 19801-3733
                                                                                TELEPHONE (302) 255-0626

                                   Decided: March 25, 2024
                                    Issued: April 11, 2024*

    John A. Sensing, Esquire                         Dominick T. Gattuso, Esquire
    Andrew M. Moshos, Esquire                        Elizabeth A. DeFelice, Esquire
    1313 North Market Street                         300 Delaware Avenue, Suite 200
    Hercules Plaza, 6th Floor                        Wilmington, DE 19801
    Wilmington, DE 19801

        Re:    Nivagen Pharm., Inc. v. Hikma Pharm. USA Inc.
               C.A. No. N23C-09-062 VLM CCLD

Dear Counsel:
      This is the Court’s decision on Defendant Hikma Pharmaceuticals PLC’s
Motion to Dismiss under Superior Court Civil Rule 12(b)(6). For the reasons stated
herein, Defendant’s Motion is GRANTED.
                           Relevant Facts & Procedural History1

     Plaintiff Nivagen Pharmaceuticals, Inc. (“Nivagen”) and Defendants Hikma
Pharmaceuticals USA, Inc. (“Hikma USA”) and Hikma Pharmaceuticals PLC
(“Hikma PLC”) are, as their names portend, pharmaceutical companies. Nivagen
and Hikma USA are both Delaware corporations. 2 Hikma PLC is a United
Kingdom entity and Hikma USA’s parent. 3
    In December 2019, Nivagen filed an Abbreviated New Drug Application
(“ANDA”) with the United States Food and Drug Administration (“FDA”), seeking

* This decision is issued after approval of the parties’ request for redactions to the originally issued
order.
1
   The following facts are derived from Plaintiff’s Complaint, D.I. 1 (hereinafter, “Compl.”) and
are presumed to be true solely for purposes of this motion.
2
   Compl. ¶¶ 2-3.
3
   Id. ¶¶ 1, 3.
approval to market a generic cysteine hydrochloride injection in 72.5 mg/mL single-
dose vials (the “Product”). 4 In January 2023, representatives from Defendants
proposed a deal to Nivagen in which Hikma USA would purchase the ANDA and
market the Product.5 Following due diligence, Hikma USA and Nivagen entered
into an “Exclusive Licensing and Commercialization Agreement” on April 14, 2023
(the “Agreement”). 6
       The Agreement required Nivagen to transfer ownership of the ANDA to
Hikma USA.7 In return, Hikma USA was obligated to make a “one-time upfront
payment”                  to Nivagen. 8 The Agreement further provided that
Nivagen and Hikma USA “would share equally in the net profits generated by the
sales of the Product.”9 To ensure that the Product would generate profits, Hikma
USA was “responsible for maintaining the ANDA” and obligated to “use best efforts
to Commercialize the Product.”10
      The parties’ plans to commercialize the Product were disrupted less than two
weeks after they executed the Agreement. Specifically, on April 25, 2023, the FDA
sent Hikma USA a letter
                            ” 11 The FDA
                    which had been the topic of disclosures during due diligence.12
The next day, April 26, 2023,                                 the ANDA. 13 The
ANDA was
                    . 14 This development changed Hikma USA’s views on the
Agreement.
     On April 27, 2023—one day before the                 upfront payment was
due—Hikma USA sent Nivagen a letter seeking to modify the Agreement.15 Hikma
USA took the position that

4
   Id. ¶ 7.
5
   Compl. ¶¶ 10, 14.
6
   Id. ¶¶ 14, 35.
7
   Id. ¶ 36.
8
   Id. ¶ 40.
9
   Id. ¶ 42.
10
    Id. ¶¶ 37, 43.
11
    Id. ¶ 62.
12
    Id. ¶¶ 17-21, 28-34.
13
    Id. ¶ 64.
14
    Id. ¶¶ 63-64.
15
    Id. ¶ 66.
                                        2
                16
                    Hikma USA
         . Nivagen refused and requested assurances that Hikma USA would pay
         17

the full             18
                         Hikma USA did not do so and has not paid Nivagen to date.19
In addition to failing to make the upfront payment, Hikma USA allegedly chose to
discontinue the ANDA without Nivagen’s consent, apparently giving up on
commercializing the Product.20
       Hikma PLC’s role in these events is less clear. The Complaint alleges that
Hikma PLC was actively involved in the negotiation of the Agreement and the
related due diligence. 21 But after the Agreement was executed, Nivagen only
alleges that “[u]pon information and belief, Hikma [USA]’s [alleged breaches of the
Agreement were] made at the direction of, and with the connivance of, [Hikma
PLC].” 22 Nivagen’s Complaint also asserts, without explanation, that Hikma
PLC’s alleged actions were unjustified and malicious. 23
        Following Hikma USA’s alleged breaches of the Agreement, Nivagen
initiated this action by filing a three-Count Complaint against Defendants in
September 2023. Counts I and III are against Hikma USA and plead breach of
contract and unjust enrichment, respectively.24 Count II is against Hikma PLC and
pleads tortious interference with contract.25
     On December 18, 2023, Hikma USA answered the Complaint,26 but Hikma
PLC moved to dismiss Count II of the Complaint under Superior Court Civil Rule

16
    Id.
17
    Id. ¶ 67.
18
    Compl. ¶ 67
19
    Id. ¶ 72.
20
    Id. ¶¶ 79, 84. Hikma PLC asserts that
                                             See Hikma PLC’s Reply Brief in Support of its Motion
to Dismiss, D.I. 38 (hereinafter, “Def.’s Reply”) at 4 n.1. Nevertheless, for present purposes, only
the allegations in the Complaint are relevant. See US Dominion, Inc. v. Fox News Network, LLC,
2021 WL 5984265, at *21 (Del. Super. Dec. 16, 2021) (“The complaint generally defines the
universe of facts that the trial court may consider in ruling on a Rule 12(b)(6) motion to dismiss”
(quoting In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006))).
21
    Compl. ¶¶ 9-11, 15.
22
    Id. ¶¶ 74, 83, 87.
23
    Id. ¶¶ 114-16.
24
    Id. ¶¶ 98-107, 118-24.
25
    Id. ¶¶ 108-117.
26
    Hikma USA’s Answer, D.I. 25.
                                                  3
12(b)(6).27 Nivagen opposed Hikma PLC’s Motion on January 30, 2024.28 Hikma
PLC replied on February 22, 2024.29 The Court heard argument on February 29,
2024.
                                   Parties’ Contentions
       Hikma PLC’s Motion is based on a single theory. It relies on the so-called
“affiliate privilege,” which elevates the standard for tortious interference with
contract when the interferer is affiliated with the breaching party.30 Under that rule,
a plaintiff must allege that the interferer engaged in conduct that diverged from the
legitimate pursuit of its affiliate’s economic interests. 31 According to Hikma PLC,
Nivagen fails to plead any facts that support an inference of such bad faith conduct.32
       Nivagen takes the opposite view. Although Nivagen accepts that the affiliate
privilege applies, it claims it has met its burden. 33 Nivagen contends that breaching
the Agreement was not in Hikma USA’s economic interest.34 And that that since
Hikma PLC was involved in the inception of the Agreement, it is reasonable to infer
that Hikma PLC was also involved in the contravention of that Agreement. 35
Nivagen concludes that its allegations are enough to clear the low bar applicable at
the pleading stage. 36
                                    Standard of Review
       On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all
well-pleaded allegations in the complaint must be accepted as true.37 Even vague
allegations are considered well pled if they give the opposing party notice of a
claim. 38 The Court must draw all reasonable inferences in favor of the non-moving
party.39 However, the Court will not “accept conclusory allegations unsupported
27
    Hikma PLC’s Motion to Dismiss, D.I. 24 (hereinafter, “Def.’s Mot.”).
28
     Nivagen’s Answering Brief in Opposition to Hikma PLC’s Motion to Dismiss, D.I. 35
(hereinafter “Pl.’s Opp’n”).
29
    Def.’s Reply.
30
    See Def.’s Mot. at 4.
31
    Id. at 5 (citing Shearin v. E.F. Hutton Grp., Inc., 652 A.2d 578, 589 (Del. Ch. 1994)).
32
    Id. at 6-9.
33
    Pl.’s Opp’n at 7.
34
    Id. at 8-10.
35
    Id. at 10.
36
    Id.
37
    Spence v. Funk, 396 A.2d 967, 968 (Del. 1978).
38
    In re Gen. Motors, 897 A.2d at 168 (quoting Savor, Inc. v. F.M.R. Corp., 812 A.2d 894, 896-
97 (Del. 2002)).
39
    Id.
                                                   4
by specific facts,” nor “draw unreasonable inferences in favor of the non-moving
party.” 40 The Court will grant the motion to dismiss “only if it appears with
reasonable certainty that the plaintiff could not prove any set of facts that would
entitle [the plaintiff] to relief.”41
                                           Discussion
        A tortious interference with contract claim must satisfy five elements: “(1) a
contract, (2) about which defendant knew, and (3) an intentional act that is a
significant factor in causing the breach of such contract, (4) without justification,
(5) which causes injury.”42 The scope of this tort is “narrowly circumscribe[d]” in
Delaware to avoid penalizing legitimate competition in the marketplace. 43 The
affiliate privilege emanates from similar principles.
       Respect for corporate separateness is a pillar of Delaware jurisprudence.44 In
light of that tenet, Delaware courts have chosen to make it difficult to implicate a
parent entity in a claim for its subsidiary’s breach of contract. 45 Were it otherwise,
“every-day consultation or direction between parent corporations and subsidiaries
about contractual implementation would lead parents to be always brought into
breach of contract cases.”46 So, Delaware courts will presume that a parent entity’s
alleged interference was justified by legitimate profit-seeking activities, and
plaintiffs must allege specific facts to rebut that presumption.47 In other words, the
plaintiff “must adequately plead that the defendant ‘was motivated by some
malicious or other bad faith purpose.’”48

40
    Price v. E.I. DuPont de Nemours & Co., 26 A.3d 162, 166 (Del. 2011) (citation omitted).
41
    Sliney v. New Castle Cty., 2019 WL 7163356, at *1 (Del. Super. Dec. 23, 2019).
42
    Surf’s Up Legacy Partners, LLC v. Virgin Fest, LLC, 2021 WL 117036, at *6 (Del. Super. Jan.
13, 2021) (quoting Bhole, Inc. v. Shore Invs., Inc., 67 A.3d 444, 453 (Del. 2013)).
43
    Id. (quoting Shearin, 652 A.2d at 589).
44
    See Barbey v. Cerego, Inc., 2023 WL 6366055, at *9 (Del. Ch. Sept. 29, 2023) (“[O]ur
corporation law is largely built on the idea that the separate legal existence of corporate entities
should be respected . . . .” (alteration in original) (quoting Allied Cap. Corp. v. GC-Sun Hldgs.,
L.P., 910 A.2d 1020, 1038 (Del. Ch. 2006))).
45
    Surf’s Up, 2021 WL 117036, at *7; see also New Enter. Assocs. 14, L.P. v. Rich, 292 A.3d
112, 143 (Del. Ch. 2023) (discussing the conceptual underpinnings of the affiliate privilege).
46
    Renco Grp., Inc. v. MacAndrews AMG Hldgs. LLC, 2015 WL 394011, at *9 (Del. Ch. Jan. 29,
2015) (quoting Allied Cap., 910 A.2d at 1039)).
47
    Surf’s Up, 2021 WL 117036, at *7 (citations omitted); Shearin, 652 A.2d at 591.
48
    James Cable, LLC v. Millennium Digit. Media Sys., L.L.C., 2009 WL 1638634, at *4 (Del. Ch.
June 11, 2009) (quoting Shearin, 652 A.2d at 591).
                                                   5
       Although a plaintiff’s burden at the pleading stage is light here, Nivagen fails
to carry its burden to save its tortious interference claim. Nivagen’s allegations
against Hikma PLC are conclusory and lack any specific assertions that raise a
reasonable inference of bad faith conduct. Since bad faith is required in this
context, Nivagen’s Complaint fails as to Hikma PLC.
       Not one fact in the Complaint relates to a reason why Hikma PLC would be
motivated to injure Nivagen or otherwise act against Hikma USA’s pecuniary
interest. Nivagen’s brief states that “Nivagen specifically averred that Hikma
PLC’s actions were taken without justification and not in good faith, to injure
Nivagen.” 49 But, while the Complaint uses that language, it is entirely
conclusory. 50 Instead of “alleg[ing] facts” 51 to show Hikma PLC’s malice,
Nivagen simply parrots the language of the standard in the guise of a factual
allegation. That is not enough. 52
       Nivagen’s contention that Hikma PLC must have been acting in bad faith
because Hikma USA’s breach was financially inefficient is unpersuasive. An
efficient breach occurs where adhering to a contract is more burdensome than
compensating the other party for a breach; and it is a classic example of a justified
breach. 53 In claiming Hikma USA’s alleged breaches were inefficient, Nivagen
only addresses the costs Hikma USA might be obliged to pay as a result.54 Nivagen
takes no account of the countervailing expenses that Hikma USA potentially
avoided.
       Even assuming Hikma PLC was involved in the decision to breach the
Agreement, and further assuming that the breach was inefficient, that alone only
suggests Hikma PLC made a poor business choice. It takes an inferential leap to
conclude that Hikma PLC harbored an improper motive when the Complaint offers
no hint of what that motive might have been. Even at the pleading stage, the Court
will not preserve unsupported claims by crediting speculation.55

49
    Pl.’s Opp’n at 10.
50
    Compl. ¶¶ 115-16.
51
    Renco Grp., 2015 WL 394011, at *9 (emphasis in original).
52
    See Yu v. GSM Nation, LLC, 2018 WL 2272708, at *19 (Del. Super. Apr. 24, 2018) (“[I]t is
not enough to make conclusory allegations mirroring the elements . . . .”).
53
    James Cable, at *4 (Del. Ch. June 11, 2009) (quoting Allied Cap., 910 A.2d at 1039).
54
    Pl.’s Opp’n at 8-10.
55
    See In re Paramount Gold & Silver Corp. Stockholder Litig., 2017 WL 1372659, at *12 n.65
(Del. Ch. Apr. 13, 2017) (explaining an inference cannot “be based on surmise, speculation,
conjecture, or guess, or on imagination or supposition” (quoting In re Asbestos Litig., 2017 WL
510463, at *1 n.2 (Del. 2017) (TABLE))).
                                               6
       Nivagen’s principal authority in defense of its Complaint—PPL Corp. v.
Riverstone Holdings LLC 56—does not militate for a different result. In that case,
the Court of Chancery permitted a tortious interference claim to go forward against
the parent of a breaching party. 57 But, critically, the Court found “it is well-pled
here that [the parent] ‘use[d] its control of a subsidiary, not to enrich the subsidiary,
but to divert value from the subsidiary to itself in a bad faith manner . . . .’” 58
Indeed, the complaint in PPL detailed an alleged scheme in which a parent entity
drained its subsidiary of resources and then caused the subsidiary to breach an
indemnity agreement by filing suit against PPL. 59 The alleged purpose of that
scheme was for the parent to “profit from a subsequent lawsuit against the PPL
parties.”60 Nivagen offers no comparable explanation of what unjustified benefit
Hikma PLC sought to obtain from Hikma USA’s alleged breaches, let alone an
explanation supported by facts. Because the focus is on Hikma PLC’s motivation,
that explanation is necessary.
       Nivagen’s other chief authority—New Enterprise Associates 14 L.P. v.
Rich —is distinguishable on the same grounds. The plaintiffs in New Enterprise
      61

were able to overcome the affiliate privilege at the pleading stage. 62 Like in PPL,
the New Enterprise plaintiffs did so by pleading specific facts about how the parent
entities benefitted themselves at the expense of the subsidiary.63 In New Enterprise,
the defendant parents bought additional stock in their subsidiary “at what was
inferably an undervalued price.” 64 That displeased other investors in the subsidiary
whose right of first offer was dishonored in the process. 65 The Court of Chancery
reasoned that by paying a bargain price for the stock, the defendants ostensibly
benefitted themselves at the expense of the subsidiary. 66 The Court concluded,
“[b]ased on these pled facts, it is reasonably conceivable that the [defendants] acted
without justification.” 67 So, like PPL, New Enterprise’s result was based on

56
     2019 WL 5423306 (Del. Ch. Oct. 23, 2019).
57
     Id. at *13.
58
     Id. (second alteration and omission in original) (quoting Allied Cap., 910 A.2d at 1042).
59
     Id. at *2-5.
60
     Id. at 13.
61
     292 A.3d at 140-43.
62
     Id. at 143.
63
     Id.
64
     Id.
65
     Id. at 126-27, 143.
66
     Id. at 143.
67
     Id. (emphasis added).
                                                  7
specific factual allegations about the defendants’ motivation.        Analogous
allegations do not appear anywhere in Nivagen’s Complaint.
       In sum, Nivagen has not pled facts that raise a reasonable inference of an
improper motive by Hikma PLC. Its failure to do so is fatal to its tortious
interference claim. To the extent Nivagen is entitled to recovery, its remedy is
against Hikma USA, not Hikma PLC. Thus, Hikma PLC’s Motion to Dismiss
Count II of the Complaint is GRANTED.
                                                 Sincerely,
                                                 /s/ Vivian L. Medinilla
                                                 Vivian L. Medinilla
                                                 Judge

                                       8