Enzo Life Sciences Inc. v. Adipogen Corporation et al

Filing 172

MEMORANDUM ORDER Denying 149 MOTION for Partial Summary Judgment and To Exclude Opinion Testimony Of Andrew Whiteley, filed by Bioaxxess Inc., Adipogen Corporation, Adipogen International Inc., Georges Chappuis, Tamara Sales, Silvia Dettwiler. Signed by Judge Richard G. Andrews on 8/6/2014. (nms)

IN THE UNITED STATE DISTRICT COURT
FOR THE DISTRICT F DELAWARE

ENZO LIFE SCIENCES, INC., a New York
corporation,
Plaintiff,
v.

Civil Action No. 11-00088-RGA

ADIPOGEN CORPORATION, a California
corporation, ADIPOGEN INTERNATIONAL,
INC., a Delaware corporation, BIOAXXESS,
INC., a Delaware corporation, GEORGES
CHAPPUIS, an individual, TAMARA SALES,
an individual, SILVIA DETTWILER, an
individual, and DOES 1 through 50
Defendants.

Before the Court is Defendants' Motion for P

ial Summary Judgment. (D.I. 149). At the

pretrial conference on June 20, 2014, the Court den ed the majority of Defendants' motion except
for three of Defendants' contentions, including Defi ndant's claim that Defendant Silvia Dettwiler
was released from all claims against her. (D.I. 159 (hereafter "Tr.") at 4; D.I. 151 at 12).

The

Court ordered Plaintiff to respond to the portion of he Defendants' motion addressing whether
Dettwiler had been released from all claims against her. (Tr. at 4; D.I. 156 at 2). On July 25,
2014, the Court ordered Defendants to submit a lett r clarifying the impact of Swiss law on the
release. (D.I. 160). Plaintiff was permitted, but n t required, to respond. Id. This matter has
nowbeenfullybriefed. (D.l.151;D.1.157;D.l.1 3;D.l.170). Forthereasonssetforth,the
portion of Defendants' Motion for Partial Summary Judgment regarding the claims against
Dettwiler is DENIED.
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I.

Background
Plaintiff Enzo Life Sciences, Inc. ("Enzo") hr ught this action in January 2011 against

Defendants Adipogen Corporation, Adipogen Inte ational, Inc., and Bioaxxess, Inc., Georges
Chappuis, Tamara Sales, and Silvia Dettwiler (colle tively "Defendants") (D.I. 1). Enzo is a New
York corporation in the business of producing, mar eting, and selling research and diagnostic
technologies and products. (D.I. 1 at 5; D.I. 155, x. A at 2). In a stock purchase agreement
signed on May 29, 2007 (the "Stock Purchase Agre ment"), Enzo acquired Axxora Life Sciences,
Inc., a manufacturer and marketer ofresearch prod cts, and its five subsidiary companies. (D.I.
155, Ex. A at 5; D.I. 1 at 11). Included in the acqu sition was Alexis Corporation, a Swiss
subsidiary later renamed Enzo Life Sciences AG(" LS AG"). (D.I. 155, Ex. A at 5; D.I. 1 at 2).
Enzo alleges that sometime shortly after the acquisi ·on, Sales, Chappuis, and Dettwiler, officers of
Axxora and Alexis, and their co-conspirators establ shed a competing company, Bioaxxess, Inc.
(D.I. 1 at 26-27). Enzo alleges that the Defendants breached the non-compete clause contained in
the Stock Purchase Agreement and committed othe tortious acts. Id. at 40-55.
Ms. Dettwiler, a Swiss citizen, was the Deputy President and Vice President of Operations
Europe at ELS AG, a member of its Board ofDirec ors, and a selling shareholder under the Stock
Purchase Agreement. (D.I. 155, Ex. A at 4-5; D.I.

at 8). Enzo has brought claims against

Dettwiler for breach of contract, aiding and abettin Chappuis 's breach of fiduciary duty,
misappropriation of trade secrets, conversion, unfai competition, tortious interference with
contract and business relations, unjust enrichment, nd civil conspiracy. (D.I. 1 at 40-41, 45-55).
Enzo alleges that, in the Stock Purchase Agree ent, Dettwiler agreed that she would not
compete with Enzo, solicit customers, nor use Enzo s confidential information for her own benefit
for a period of two years. Id. at 2. On July 1, 200 , Dettwiler entered into an employment
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agreement with Alexis (the "Employment Agreem nt"). (D.I. 158, Ex. A at 2). The
Employment Agreement also contained a non-com ete provision that prohibited Dettwiler from
competing with Enzo or any affiliate. Id. at 6-7.

n July 29, 2010, Dettwiler terminated her

employment with ELS AG. (D.I. 155, Ex. A at 5). On October 7, 2010, Dettwiler and ELS AG
entered into an Agreement Regarding Dissolution f Employment Relationship (the "Dissolution
Agreement"). (D.I. 152, Ex. C). The Dissolutio Agreement released Dettwiler from the
non-competition clause in the Employment Agree ent. Id. at 5.

II. Legal Standard
A. Summary Judgment

"The court shall grant summary judgment ifth movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to "udgment as a matter oflaw." FED. R. CIV. P.
56(a). The moving party has the initial burden of roving the absence of a genuinely disputed
material fact relative to the claims in question. Ce otex Corp. v. Catrett, 477 U.S. 317, 330
(1986). The burden then shifts to the non-movant o demonstrate the existence of a genuine issue
for trial. Matsushita Elec. Indus. Co. v. Zenith Ra io Corp., 475 U.S. 574, 586-87 (1986);
Williams v. Borough of West Chester, Pa., 891 F.2 458, 460-61 (3d Cir. 1989). "A party
asserting that a fact cannot be or is genuinely dispu ed must support such an assertion by: (A)
citing to particular parts of materials in the record, i eluding depositions, documents,
electronically stored information, affidavits or decl rations, stipulations ... , admissions,
interrogatory answers, or other materials; or (B) sh wing that the materials cited [by the opposing
party] do not establish the absence ... of a genuine dispute .... " FED. R. CIV. P. 56(c)(l).
When determining whether a genuine issue of aterial fact exists, the court must view the
evidence in the light most favorable to the non-mov · g party and draw all reasonable inferences in
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that party's favor. Scottv. Harris, 550 U.S. 372, 3 0 (2007); Wishkin v. Potter, 476 F.3d 180, 184
(3d Cir. 2007). Material facts are those "that coul affect the outcome" of the proceeding, and "a
dispute about a material fact is 'genuine' if the evi ence is sufficient to permit a reasonable [fact
finder] to return a verdict for the nonmoving party.' Lamont v. New Jersey, 637 F.3d 177, 181
(3d Cir. 2011) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). If the
non-moving party fails to make a sufficient showi

on an essential element of its case with

respect to which it has the burden of proof, the mo ing party is entitled to judgment as a matter of
law. See Celotex Corp., 477 U.S. at 322.
B.

Contract Construction

The construction of a contract is a question of aw for the court to decide. Haft v. Dart Grp.
Corp., 841 F. Supp. 549, 565 (D. Del. 1993) (citin Klair v. Reese, 531A.2d219, 222 (Del.
1987)). In a diversity action, a federal court must pply the conflicts oflaw principles of the
forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). "In Delaware,
when there is no reference to the choice oflaw in a contract, courts apply the 'most significant
relationship' test articulated in [§188] of the RESTA EMENT (SECOND) OF CONFLICT OF LAWS to
resolve conflict issues arising out of the interpretati n and validity of contracts." Cohen v.
Formula Plus, Inc., 750 F. Supp. 2d 495, 501 (D.
Lake, 594 A.2d 38, 41 (Del. 1991). To determine

el. 2010); see also Travelers Indem. Co. v.
e forum with the most significant

relationship, the court must consider: the place of co tracting; the place of negotiation; the place of
performance; the location of the subject matter oft e contract; and the domicile, residence,
nationality, place of incorporation and place ofbusi ess of the parties. Cohen, 750 F. Supp. 2d at
501 (quotingRESTATEMENT(SECOND)OFCONFLIC OF LAWS§ 188(2) (1971)).

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III. Discussion
The initial burden is on Defendants to demons rate that as a matter of law the Dissolution
Agreement released Dettwiler from the claims asse ed against her by Enzo. Defendants have not
met that burden.

A. Swiss Law Governs the Interpretation of he Dissolution Agreement
The Dissolution Agreement is silent on choice oflaw. (D.I. 152, Ex. C). Delaware conflict
oflaw principles require that the Dissolution Agree ent be construed under Swiss law. Dettwiler
is a citizen of Switzerland, and ELS AG is a Swiss orporation. (D.1. 155, Ex. A at 4). Dettwiler
was employed by ELS AG in Switzerland. Id. at 4 5. The Dissolution Agreement was executed
in Switzerland and concerned the subject of the pri r Employment Agreement, which expressly
provided that Swiss law governed the Employment Agreement. (D.I. 152, Ex Cat 4-5; D.I. 158,
Ex. A at 9). Accordingly, Switzerland has the mo t significant relationship to the Dissolution
Agreement. Therefore, Switzerland's laws govern the interpretation and validity of the
Dissolution Agreement.

B.

Defendants' Arguments for Summary Ji dgment

Defendants essentially make two arguments re arding the Dissolution Agreement. First,
Defendants assert that the Dissolution Agreement

ust be interpreted broadly, thus releasing

Dettwiler from all future claims, including tort clai s, by ELS AG and its parent company Enzo.
(D.1. 151 at 12-13). Second, Defendants assert tha neither Enzo nor ELS AG properly rescinded
of the Dissolution Agreement under Swiss law. ( .I. 151 at 13; D.I. 163 at 1).
C. Analysis

Regarding the first argument, Defendants have ot provided sufficient evidence for the Court
to determine the intent of the parties and the proper interpretation of the contract as a matter of
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Swiss law. The only parties to the Employment A eement were Dettwiler and Alexis, later
renamed ELS AG. (D.I. 158, Ex. A at 2). Theo ly parties to the Dissolution Agreement were
Dettwiler and ELS AG. (D.I. 152, Ex.Cat 4). P ragraph 5 of the Dissolution Agreement states
that, "Enzo Life Sciences shall release Ms. Silvia

ettwiler from the non-competition clause

stipulated in the employment agreement." Id. at 5 (emphasis added).

Paragraph 8 of the

Dissolution Agreement states, "[T]he parties shall e satisfied in full and final settlement of all
claims arising from the employment agreement, so hat neither party may claim anything more
from the other party." Id. (emphasis added). Wh le Defendants claim that these provisions
encompass any claims by ELS AG or Enzo, they ha e not shown that, under Swiss laws of contract
construction, these provisions of the Dissolution A eement release Dettwiler for any claims
brought by ELS AG's parent company Enzo. Furt ermore, Defendants have neither shown that
the Dissolution Agreement released Dettwiler from the non-competition clause in the Stock
Purchase Agreement, nor that the tort claims brou

t by Enzo against Dettwiler are claims "arising

from the employment agreement."
Defendants cite only Delaware cases addressi

the parties' intent or validity of a release

under Delaware and federal law. (D.I. 151 at 12-1 ); Fox v. Rode/, Inc., 1999 WL 588293, at *5
(D. Del. July 14, 1999) (applying the substantive la of Delaware to the construction of a release
agreement); Roberts v. Comcast Cable Co., 2004

L 1887487, at *7 (D. Del. Aug. 23, 2004)

(holding that a general release constituted a waiver f Title VII retaliation and state law claims).
However, because Swiss law controls the interpreta ion of the Dissolution Agreement, these cases
are irrelevant.
Regarding the second argument, that neither E S AG nor Enzo rescinded the Dissolution
Agreement, Defendants cite in their initial brief tot eir own Statement of Undisputed Facts, which
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states, "There has been no valid rescission of Dett iler's Dissolution Agreement, including the
release of claims provided in paragraphs 5 and 8, a Plaintiff has made no such application for a
rescission of the agreement in accordance with Sw ss law." (D.I. 151 at 13; D.I. 150 at 3).
However, Plaintiffs opposition brief does dispute he validity of the Dissolution Agreement.
(D.I. 157 at 13). Plaintiff claims that Article 31 o the Swiss Code of Obligations gives a party
one year to declare a contract non-binding if the pa y was influenced by error or deception. Id.
Plaintiff provides a letter, dated October 6, 2011, p rporting to declare relevant portions of the
Dissolution Agreement non-binding. (D.I. 158, E . Bat 3).
In response to Plaintiffs contention, Defendan s claim that ELS AG raised the allegations that

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are now the subject to this suit during negotiations egarding the Dissolution Agreement, and

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therefore, the Dissolution Agreement was not enter d into under material error and remains

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binding. (D.I. 163 at 1). In support of their position, Defendants provide an affidavit from
Dettwiler's Swiss counsel, Dr. Balthasar Bessenich who asserts that Dettwiler's activities, which
are now the basis of this litigation, were discussed uring the negotiations. (D.I. 163-1 at 2).
Defendants also assert that the Dissolution Agreem nt remains binding because Article 67 of the
Swiss Code of Obligations required ELS AG to file a claim for restitution within one year of
discovering the alleged error or deception. (D.I. 1 3 at 1-2). In support of this argument,
Defendants provide what is purported to be the "le ing case" from the Swiss Federal Court
holding that if a party claiming error or duress fails to file a claim for restitution within one year,
then a contract is deemed ratified. (D.I. 163-1 at 3 Ex. 2; D.I. 164). The case provided states,
"The purchaser can demand a refund of the price ac ording to the provisions regarding unjustified
enrichment if the contract turns out to have been n n[-]binding on him on account of error."
(D.I. 164 at 8) (emphasis added).
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First, there is genuine question of fact whethe the Dissolution Agreement was entered into
under error or deception, or whether Plaintiff was ware ofDettwiler's alleged activity when the
parties entered into the Dissolution Agreement.

efendants' sole evidence is Bessenich's

affidavit. (D.I. 163 at 1; D.I. 163-1at1-2). How ver, Defendants never disclosed Bessenich as
a witness in this litigation nor as an expert in Swiss aw, and the affidavit from Bessenich was only
submitted to the Court on July 30, 2014, after the b "efing on the motion. (D.I. 170 at 1; D.I. 163
at 1; D.I. 163-1 at 1-2). Therefore, because of the iming of Bessenich's affidavit, Plaintiff has
had no opportunity to refute Bessenich's assertions or to provide contrary evidence. (D.I. 170 at
1). Therefore, the Court cannot rely on Bessenich s affidavit for any purpose.
Second, questions remain whether ELS AG pr perly declared the relevant portions of the
Dissolution Agreement non-binding, or whether S iss law required ELS AG to file a claim for
restitution in order for the Dissolution Agreement t be non-binding. Defendants rely on the
opinion ofBessenich regarding Swiss law and the recedential value of the provided Swiss case.
(D.I. 163-1 at 3-4). Again, the Court cannot rely o Bessinich's opinion; nor can the Court rely
on the citation to single case from a foreign court

"th which this Court is wholly unfamiliar.

Furthermore, the Court reads the Swiss case and th relevant provisions of the Swiss Code of
Obligations differently than Defendants. The Swi s law seems to draw a distinction between
declaring a contract non-binding under Article 31 o the Swiss Code of Obligations, cited by
Plaintiff, and the provisions for seeking restitution, ited by Defendants. (D.I. 164 at 8).
Regardless, the Court has not been provided with s fficient evidence regarding Swiss law to
properly understand the Swiss code or the cited cas . Thus, the Court is unable to determine as a
matter oflaw whether the Dissolution Agreement is or remains, binding.

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Therefore, Defendants are not entitled to s

ary judgment with respect to their contention

that Dettwiler was released from the claims assert

against her.

IV. Conclusion
For the foregoing reasons, Defendants' Motio for Partial Summary Judgment regarding the
claims against Silvia Dettwiler (D.I. 149) is DENI D.
Entered this

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/J:_ day of August, 2014.