Perrigo Company v. International Vitamin Corporation et al

Filing 18

MEMORANDUM OPINION. Signed by Judge Matthew W. Brann on 9/7/2018. (ceg)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
No. 1:17-CV-1778

PERRIGO COMPANY,

(Judge Brann)1

Plaintiff
v.
INTERNATIONAL VITAMIN
CORPORATION and IVP, LLC,
Defendants.

MEMORANDUM OPINION
SEPTEMBER 7, 2018
I.

BACKGROUND
On December 8, 2017, Plaintiff, Perrigo Company, hereinafter “Perrigo,”

filed a complaint, and subsequently an amended, three-count complaint, on March
15, 2018,2 against Defendants, International Vitamin Corporation and IVP, LLC,
hereinafter collectively “IVC.” Thereafter, on April 6, 2018, Defendant filed a
motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure
to state a claim.3 The motion is a partial motion to dismiss Count Two only.4 The

1

An Article III Judge in the Middle District of Pennsylvania sitting by designation in the
District of Delaware in lieu of the then vacant judgeships in that District.

2

ECF No. 6.

3

ECF No. 9.

4

ECF No. 9 at 2.

matter has now been fully briefed. For the reasons that follow, the motion will be
denied and Defendants ordered to file an answer to the amended complaint.
II.

DISCUSSION
A.

Motion to Dismiss Standard

When considering a motion to dismiss for failure to state a claim upon which
relief may be granted,5 a court assumes the truth of all factual allegations in a
plaintiff’s complaint and draws all inferences in favor of that party;6 the Court does
not, however, assume the truth of any of the complaint’s legal conclusions.7 If a
complaint’s factual allegations, so treated, state a claim that is plausible – i.e., if
they allow the court to infer the Defendant’s liability – the motion is denied; if they
fail to do so, the motion is granted.8
B. Facts Alleged in the Amended Complaint9
The facts alleged in the amended complaint, which I must accept as true for
the purposes of this motion, are as follows. Perrigo is “one of the world’s leading
manufacturers of over-the-counter pharmaceutical products.”10 IVP is a wholly                                                            
5

Federal Rule of Civil Procedure 12(b)(6).

6

Phillips v. Cnty. Of Allegheny, 616 F.3d 224, 228 (3rd Cir. 2008).

7

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). See also Connelly v. Lane Const. Corp., 809
F.3d 780, 786 (3rd Cir. 2016).

8

Id.

9

Because this is a partial motion to dismiss, I only refer to the facts as they relate to Count
Two.

10

Amended Complaint, ECF No. 6 at ¶ 1.

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owned subsidiary of International Vitamin Corporation.11 Perrigo and IVC entered
into an Asset Purchase Agreement (hereinafter either “Asset Purchase Agreement”
or “the contract”) for the sale of Perrigo’s vitamins, minerals, and supplements
business (hereinafter the “Business”) to IVC.12 The sale closed on August 5,
2016.13
“At the time of sale, the Business had several preexisting and potential
liabilities, most of which were assumed by the buyer but a handful of which were
retained by the seller.”14 “On or after the closing date of the sale, Defendants
terminated several employees of the Business.”15 “Pursuant to the Asset Purchase
Agreement, Perrigo made severance payments to those employees.”16 “The
payments to each employee amounted to twelve weeks of salary, plus one week of
salary for each year the employee worked for Perrigo.”17 “To date, Defendants
have refused to reimburse Perrigo for the full amount of its severance payments.”18

11

Id. at ¶ 2-3.

12

Id. at ¶ 6.

13

Id.

14

Id. at ¶ 8.

15

Id. at ¶ 21.

16

Id. at ¶ 22.

17

Id.

18

Id. at ¶ 23.

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Count Two of the Amended Complaint is for Breach of Contract.19 Perrigo
alleges that “Defendants breached the Asset Purchase Agreement by refusing to
reimburse Perrigo for the full employee severance payments the parties agreed to
in the Asset Purchase Agreement.”20 “Defendants’ refusal to reimburse Perrigo for
employee severance at the agreed-upon rate has caused Perrigo to suffer damages
in the amount of $1,190,877.52.”21
C.

Analysis

The dispute as to Count Two of the amended complaint relates to certain
contractual clauses found in the Asset Purchase Agreement, and specifically the
payment obligations to “Terminated Business Employees.” Perrigo did not attach
the contract to the amended complaint. IVC, however, did attach it to its filings.
“Generally, consideration of a motion to dismiss under Rule 12(b)(6) is limited to
consideration of the complaint itself.”22 Typically, to consider materials outside
the complaint, it must be converted to a motion for summary judgment.23 However,
“[c]onsideration of materials outside the complaint is not entirely foreclosed on a
12(b)(6) motion.”24

19

Id. at 6.

20

Id. at ¶ 30.

21

Id. at ¶ 31.

22

Faulkner v. Beer, 463 F.3d 130, 134 (2d Cir. 2006).

23

See id. and Fed. R. Civ. P. 12(d).

24

Faulkner, 463 F.3d at 134.

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In sum, it is permissible to consider full text of documents partially quoted
in complaint.25 It is also permissible to consider documents relied upon by plaintiff
in drafting the complaint and integral to the complaint.26 “However, before
materials outside the record may become the basis for a dismissal, several
conditions must be met.”27 “For example, even if a document is “integral” to the
complaint, it must be clear on the record that no dispute exists regarding the
authenticity or accuracy of the document.”28 It must also be clear that there exist
no material disputed issues of fact regarding the relevance of the document.29
Here, I find that these conditions have been met, as to at least certain of
Defendants’ attachments. Specifically, the Asset Purchase Agreement itself is
integral to the complaint, and I will consider it. However, I have not considered
the attached ‘Declaration of Michael Yoder,’ as that affidavit is outside the
complaint and is foreclosed from my consideration on a Rule 12(b)(6) motion.
The relevant clauses of the Asset Purchase Agreement are set forth below in
their entirety.

25

San Leandro Emergency Med. Group Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801,
808–09 (2d Cir.1996).

26

Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47–48 (2d Cir.1991).

27

Faulkner, 463 F.3d at 134.

28

Id, See also e.g., Kaempe v. Myers, 367 F.3d 958, 965 (D.C.Cir.2004); Alternative Energy,
Inc. v. St. Paul Fire and Marine Ins. Co., 267 F.3d 30, 33 (1st Cir.2001).

29

Faulkner, 463 F.3d at 134.

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Section 8.1 Designated Employees; Excluded Employees;
Transitional Employees. At or before the Closing, Seller shall (a)
terminate the employment of all Business Employees, except those
Business Employees identified on Schedule 8.1(a) (collectively, the
“Excluded Employees”) and those Business Employees identified on
Schedule 8.1(b) (collectively, the “Transitional Employees”), (such
Business Employees terminated in connection with this Section 8.1,
collectively, the “Designated Employees”), and (b) pay all amounts
due to the Designated Employees by way of salaries, bonuses,
incentives, commissions or, with respect to any Designated Employee
that is a Terminated Business Employee, sick leave, paid time off,
vacation days or holidays or, subject to Section 8.4, any severance or
termination payments that accrued prior to the Closing Date or
become payable as a result of the transactions contemplated by this
Agreement and/or the Ancillary Agreements. For so long as a
Designated Employee is employed by Buyer or any of its Affiliates,
the Seller Entities shall not enforce against such Designated Employee
any confidentiality, non-compete or non-solicit obligations, or
otherwise assert with respect to such Designated Employee or Buyer
or any of its Affiliates claims, in each case, that would prohibit or
place conditions on such Designated Employee’s acceptance of an
offer of employment by Buyer or any of its Affiliates, such
Designated Employee’s employment by Buyer or any of its Affiliates
in the Business, or any actions related to the Business taken by such
Designated Employee as an employee of the Buyer or any of its
Affiliates. For the removal of doubt, the Seller Entities shall not be
required to terminate the employment of any Excluded Employee or
Transitional Employee, and all such Excluded Employees and
Transitional Employees shall remain employed by the Seller Entities
or any of its Affiliates. Buyer will hire enough Designated Employees
so Seller Entities have no obligations or Liabilities under the WARN
Act or similar Law. Notwithstanding the foregoing, for those Business
Employees identified on Schedule 8.1(c), Buyer shall notify Seller
within ten (10) Business Days of the date hereof whether such
Business Employees shall be Excluded Employees or Designated
Employees.30

30

ECF No. 10-1 at 48-49.

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Section 8.2 Continuation of Base Compensation. At the Closing,
Buyer or one of its Affiliates shall offer employment at will at the
same base compensation in effect immediately prior to the Closing
Date to all Designated Employees on the terms set forth in this Article
8. Each Designated Employee who accepts Buyer’s offer of
employment pursuant to this Section shall be referred to herein as a
“Transferred Business Employee.” For each Transferred Business
Employee, Buyer shall maintain for a period of at least 12 months
following the Closing Date (or until any earlier termination of
employment) the same base compensation in effect for such
Transferred Business Employee immediately prior to the Closing. As
of and after Closing, Buyer will provide to each Transferred Business
Employee full credit for purposes of eligibility to participate, level of
severance and other benefits and vesting (but not for purposes of
benefit accrual or any purpose under any retiree welfare plan) under
any employee benefit plan, policy or arrangement of Buyer or any of
its Affiliates for such Transferred Business Employee’s service prior
to the Closing with any Seller Entity, to the same extent such service
is recognized by such Seller Entity immediately prior to Closing,
except as such credit would result in a duplication of benefits. For the
avoidance of doubt, Buyer or its Affiliate shall not be obligated to
employ any Transferred Business Employee for any particular period
of time.31
*****
Section 8.4 Severance.
(a) In the event that a Business Employee does not, for any reason,
continue employment with Buyer or its Affiliates at or immediately
after the Closing (the “Terminated Business Employees”), which
results in any obligation, contingent or otherwise, of Seller or any of
its Affiliates to pay any severance or other benefits (including such
benefits required under applicable Laws) to any Terminated Business
Employees or any additional Liability incurred by Seller and its
Affiliates in connection therewith, Seller shall remain solely
responsible for the payment and performance of all such severance
and other benefits and Liabilities; provided, however, that Buyer shall,
and shall cause its Affiliates to, reimburse Seller and its Affiliates

31

ECF No. 10-1 at 49.

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(including the other Seller Entities) an amount equal to the severance
that would have been due to such Terminated Business Employees
under the terms set forth on Schedule 8.4 as if such Terminated
Business Employees were employed by Buyer and involuntarily
terminated without cause by Buyer, taking into account and
combining such Terminated Business Employees’ service with Seller
and its Affiliates prior to the Closing. Notwithstanding the foregoing,
neither Buyer nor any of its Affiliates shall be obligated to reimburse
Seller for any severance paid to any Terminated Business Employee
who receives an employment offer from Buyer or any of its Affiliates
for a Comparable Position, as such term is defined in Perrigo
Company’s U.S. Severance Policy amended and restated effective
November 12, 2015; provided that Perrigo Company PLC will not
claim that a Terminated Business Employee is entitled to severance
because Buyer or any of its Affiliates did not offer the Terminated
Business Employee equity incentive compensation so long as there is
not a material diminution in the aggregate amount of such Terminated
Business Employee’s total annual compensation (base salary plus total
target incentive compensation) in relation to the aggregate amount of
such Terminated Business Employee’s total annual compensation in
effect immediately prior to the Closing Date.
(b) In the event Buyer does not offer a Transferred Business
Employee a Comparable Position (as defined in the Perrigo Severance
Plan) which results in any obligation, contingent or otherwise, of
Seller or any of its Affiliates to pay any severance or other benefits to
such Transferred Business Employee under the Perrigo Severance
Plan, Seller shall remain solely responsible for the payment and
performance of all such severance and other benefits and Liabilities;
provided, however, Buyer shall, and shall cause its Affiliates to,
reimburse Seller and its Affiliates (including the other Seller Entities)
an amount equal to the severance that would have been due to such
Transferred Business Employee under the terms set forth on Schedule
8.4 if such Transferred Business Employee’s employment was
terminated involuntarily without cause by Buyer, taking into account
and combining such Transferred Business Employee’s service with
Seller and its Affiliates prior to the Closing.
(c) With respect to each Transferred Business Employee whose
employment is terminated involuntarily without cause during the
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period commencing on the Effective Time and ending 12 months after
the Closing Date (the “Severance Period”), Buyer shall provide such
Transferred Business Employee with severance benefits in accordance
with the terms set forth on Schedule 8.4, taking into account and
combining such Transferred Business Employee’s service with Seller
and its Affiliates prior to the Closing and with Buyer and its Affiliates
on and after the Closing.32

*****
Section 8.7 Transitional Employees. Effective as of the Closing
Date, Seller shall continue to employ the Transitional Employees until
the earlier of (a) such time as Buyer or any of its Affiliates shall
specify or (b) nine (9) months in the case of Bill Austin or 180 days
from the Closing Date in the case of all other Transitional Employees
(the “Transitional Employee Termination Date”); provided, however,
Seller is not required to continue to employ Transitional Employees
who terminate their employment voluntarily or are terminated by
Seller for cause. Buyer or any of its Affiliates shall notify Seller of
such date in writing at least fifteen (15) days prior to the Transitional
Employee Termination Date. For the avoidance of doubt, Buyer or
any of its Affiliates may specify a different Transitional Employee
Termination Date for each Transitional Employee. From the Closing
until the Transitional Employee Termination Date, Buyer shall
reimburse Seller for the reasonable costs to employ each Transitional
Employee (including, without limitation, base compensation, the costs
for such employee’s participation in the Benefit Plans set forth on
Schedule 4.16 and all related employer taxes (such costs, collectively,
the “Reimbursable Expenses”). From the Closing until the applicable
Transitional Employee Termination Date, Seller (1) shall not increase
the base compensation or incentive opportunity of any Transitional
Employee, and shall not grant any new equity incentive awards to any
Transitional Employee, and (2) shall not make any changes to the
Benefit Plans covering such Transitional Employees that do not also
apply to other similarly situated employees of Seller. Upon the
occurrence of the Transitional Employee Termination Date, unless
Seller elects to continue the employment of any Transitional

32

ECF No. 10-1 at 49-50.

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Employee, Buyer shall reimburse Seller an amount equal to the
severance that would have been due to such Transitional Employee
under the terms set forth on Schedule 8.4 if such Transitional
Employee’s employment was terminated involuntarily without cause
by Buyer, taking into account and combining such Transitional
Employee’s service with Seller and its Affiliates prior to the
Transitional Employee Termination
Date.33
The Asset Purchase Agreement provides that Delaware law shall apply to
any dispute.34 “Delaware adheres to the ‘objective’ theory of contracts, i.e. a
contract’s construction should be that which would be understood by an objective,
reasonable third party.”35 “We will read a contract as a whole and we will give
each provision and term effect, so as not to render any part of the contract mere
surplusage.”36 “We will not read a contract to render a provision or term
‘meaningless or illusory.’”37 When the contract is clear and unambiguous, we will
give effect to the plain-meaning of the contract’s terms and provisions.”38 “On the
contrary, when we may reasonably ascribe multiple and different interpretations to
a contract, we will find that the contract is ambiguous.”39 “An unreasonable

33

ECF No. 10-1 at 50.

34

“This Agreement shall be governed by and construed in accordance with the Laws of the
State of Delaware…” ECF No. 10-1 at 61.

35

Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (internal citations
omitted).

36

Id.

37

Id.

38

Id. at 1159-60.

39

Id. at 1160.

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interpretation produces an absurd result or one that no reasonable person would
have accepted when entering the contract.”40 “If a contract is ambiguous, we will
apply the doctrine of contra proferentem against the drafting party and interpret the
contract in favor of the non-drafting party.”41 “The parties’ steadfast disagreement
over interpretation will not, alone, render the contract ambiguous.”42 “The
determination of ambiguity lies within the sole province of the court.”43
The Asset Purchase Agreement between the parties is hardly a model of
clarity. It is dense, wordy, and opaque, as the clauses cited above reveal. As such,
in following the law of Delaware to read the contract as a whole, the next
paragraph contains the Court’s distillation of the salient contract terms.
At or before the Closing, [Perrigo] shall [] terminate the employment of all
Business Employees, except… “Excluded Employees” [] and …“Transitional
Employees” …collectively, the “Designated Employees,” and [] pay…with respect
to any Designated Employee that is a Terminated Business Employee…any
severance or termination payments that accrued prior to the Closing Date…44
Each Designated Employee who accepts [IVC’s] offer of employment pursuant to

40

Id.

41

Id.

42

Id.

43

Id.

44

Asset Purchase Agreement, Section 8.1, ECF No. 10-1 at 48.

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this Section shall be referred to herein as a “Transferred Business Employee”…45
In the event that a Business Employee does not, for any reason, continue
employment with [IVC]…at or immediately after the Closing (the “Terminated
Business Employees”), which results in any obligation…of [Perrigo]…to pay any
severance…to any Terminated Business Employees…[Perrigo] shall remain solely
responsible for the payment…of…severance…provided however46 that [IVC] shall
reimburse [Perrigo]…an amount equal to the severance that would have been due
to [] Terminated Business Employees under the terms set forth on Schedule 8.4 as
if [] Terminated Business Employees were employed by [IVC] and involuntarily
terminated without cause by IVC …47
Notwithstanding the foregoing, [] [IVC]…shall [not] be obligated to
reimburse [Perrigo] for any severance paid to any Terminated Business Employee
who receives an employment offer from [IVC]…for a Comparable Position…48
In the event [IVC] does not offer a Transferred Business Employee a Comparable
Position…[Perrigo] shall remain solely responsible for the payment and
performance of all such severance…provided, however,49 [IVC] shall…reimburse
[Perrigo]…an amount equal to the severance that would have been due to such

45

Asset Purchase Agreement, Section 8.2, ECF No. 10-1 at 49.

46

Emphasis in original.

47

Asset Purchase Agreement, Section 8.4(a), ECF No. 10-1 at 49.

48

Id.

49

Emphasis in original.

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Transferred Business Employee under the terms set forth on Schedule 8.4 if such
Transferred Business Employee’s employment was terminated involuntarily
without cause by [IVC], taking into account and combining such Transferred
Business Employee’s service with [Perrigo]…50 With respect to each Transferred
Business Employee whose employment is terminated involuntarily…during the
period commencing on the Effective Time and ending 12 months after the Closing
Date…[IVC] shall provide such Transferred Business Employee with severance
benefits…51

[Finally,] [IVC] shall reimburse [Perrigo] an amount equal to the

severance that would have been due to such Transitional Employee under the terms
set forth on Schedule 8.4 if such Transitional Employee’s employment was
terminated involuntarily without cause by [IVC].52
Once it is reduced to the clearest possible distillation of its terms, it is
evident that the contract intended IVC to reimburse Perrigo for the severance
payments made to Terminated Employees.
In the event that a Business Employee does not, for any reason,
continue employment with [IVC]…at or immediately after the
Closing (the “Terminated Business Employees”), which results in any
obligation…of [Perrigo]…to pay any severance…to any Terminated
Business Employees…[Perrigo] shall remain solely responsible for
the payment…of…severance…provided however53 that [IVC] shall

50

Asset Purchase Agreement, Section 8.4(b), ECF No. 10-1 at 50.

51

Asset Purchase Agreement, Section 8.4(c), ECF No. 10-1 at 50.

52

Asset Purchase Agreement, Section 8.7, ECF No. 10-1 at 51.

53

Emphasis in original.

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reimburse [Perrigo]…an amount equal to the severance that would
have been due to [] Terminated Business Employees under the terms
set forth on Schedule 8.4 as if [] Terminated Business Employees
were employed by [IVC] and involuntarily terminated without cause
by IVC …54
In essence, Perrigo was to pay severance to Terminated Employees and IVC was to
reimburse Perrigo for that payment.
III.

CONCLUSION
Defendants’ Motion to Dismiss pursuant to Rule 12(b)(6) is denied. An

appropriate Order follows.

BY THE COURT:

s/ Matthew W. Brann
Matthew W. Brann
United States District Judge

54

Asset Purchase Agreement, Section 8.4(a), ECF No. 10-1 at 49.

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