Perrigo Company v. International Vitamin Corporation et al

Filing 47

MEMORANDUM OPINION AND ORDER: Perrigo Corporation's Motion to Dismiss (D.I. 21 ) is DENIED AS MOOT. Perrigo Corporation's Motion to Dismiss (D.I. 32 ) is DENIED. International Vitamin Corporation's Request for Oral Argument (D.I. 42 ) is DENIED. Perrigo Corporation's answer to International Vitamin Corporation's counterclaims is due within 14 days of the date of this Order. Signed by Judge Matthew W. Brann on 1/28/2019. (ceg)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

No. 1:17-CV-01778

PERRIGO COMPANY,

(Judge Brann)

Plaintiff.
v.
INTERNATIONAL VITAMIN
COMPANY,
Defendant.

MEMORANDUM OPINION AND ORDER
JANUARY 28, 2019
Perrigo Company moved to dismiss some of the counterclaims raised by the
International Vitamin Corporation. That motion will be denied.
Background
Perrigo manufactures over-the-counter pharmaceutical products.1 On June
17, 2016, it sold one of its product lines to International Vitamin.2 The terms of that
sale were memorialized in an Asset Purchase Agreement.3

1

Amended Complaint (ECF No. 6) ¶ 1.

2

Id. ¶ 6.

3

Id. ¶ 6; Asset Purchase Agreement (ECF No. 34).

At the time of the sale, there was a class action suit pending in California that
related to one of the products in the transferred product line.4 Under the terms of the
Agreement, International Vitamin agreed to assume all future liability arising from
that matter.5 After the class action suit resolved, however, International Vitamin
refused to do so.6 This lawsuit followed.
After Perrigo filed a complaint alleging that International Vitamin had
breached its contractual indemnification duties, International Vitamin responded
with several counterclaims.7 In those counterclaims, International Vitamin alleged
that, prior to the sale, Perrigo told International Vitamin that the class action
plaintiffs had offered to settle for “a few hundred thousand dollars,” when in fact
those plaintiffs had never offered to settle for less than two million dollars.8
International Vitamin also alleged that, during negotiations, Perrigo failed to
disclose several hundred thousand dollars in “store allowance fees” charged by one
of the customers of the transferred product line.9 These two acts, International
Vitamin argued, were deliberate misrepresentations or intentional concealment of

4

Amended Complaint ¶ 10.

5

Id. ¶ 12.

6

Id. ¶ 18-19.

7

Amended Answer with Counterclaims (ECF No. 29).

8

Id. ¶¶ 59-65.

9

Id. ¶¶ 66-77.

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the truth, and as such, constituted actionable torts—specifically, fraud and
intentional concealment.10 International Vitamin also included a breach of contract
counterclaim for Perrigo’s alleged failure to disclose certain liabilities at closing, in
violation of the Asset Purchase Agreement.11 Perrigo moved to dismiss the tortbased counterclaims on November 29, 2018.12
Discussion
Perrigo argues that International Vitamin’s tort claims are really breach of
contract claims in disguise and are therefore barred by Delaware law.13 Perrigo
approaches this argument from two angles.
First, Perrigo argues that the damages alleged in the tort claims are duplicative
of the damages alleged in the breach of contract claim. 14 This Court disagrees. In
its breach of contract claim, International Vitamin alleges that Perrigo breached the

10

Id. ¶¶ 78-92.

11

Id. ¶¶ 93-97.

12

ECF No. 32. Perrigo’s previous motion to dismiss, ECF No. 21, became moot when
International Vitamin amended its counterclaims on November 8, 2018, and will therefore be
dismissed on that ground.

13

See, Pinkert v. John J. Olivieri, P.A., 2001 WL 641737 at 5 (D. Del. May 24, 2001) (“As a
general rule under Delaware law, where an action is based entirely on a breach of the terms of
a contract between the parties, and not on a violation of an independent duty imposed by law,
a plaintiff must sue in contract and not in tort.”).

14

Khushaim v. Tullow, Inc., 2016 WL 3594752 at *6 (Del. Super. Ct. June 27, 2016) (dismissing
a fraud claim where the claimed damages were “a copy-and-paste recitation of the[] contract
damages,” and where the plaintiff “fail[ed] to separate the damages incurred by any alleged
fraudulent conduct from those incurred by any alleged breach of contract”).

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Asset Purchase Agreement by failing to disclose certain outstanding liabilities at
closing (some of which happened to be outstanding “store allowance fees”
mentioned above), which—because of a specific provision in that agreement—
caused International Vitamin to overpay Perrigo by the exact amount of those
undisclosed liabilities.15 The alleged contractual damages, then, are the exact
amount of those undisclosed liabilities. In its tort claims, by contrast, International
Vitamin alleges that Perrigo, through fraud or intentional concealment, caused
International Vitamin to agree to an inflated overall price for the transferred
business. The alleged tort damages, then, are the exact amount the “true” price was
inflated by Perrigo’s deception. Though all claims rest on International Vitamin’s
dissatisfaction with paying too much for the transferred business, the tort and breach
of contract claims seek to recover separately overpaid amounts.
Second, Perrigo argues that any duty owed to International Vitamin by Perrigo
arose solely from the Asset Purchase Agreement. This Court disagrees. It is true
that a tort claim cannot be based solely on a violation of a contractual duty.16 The
law itself, however, imposes a number of independent duties on private actors in our

15

See Asset Purchase Agreement ¶ 2.7(e) (“If the final Purchase Price Adjustment Statement
discloses that Closing Net Working Capital is less than the Estimated Net Working Capital,
then the Purchase Price shall be reduced on a dollar-for-dollar basis by the amount of such
deficit.”).

16

Cornell Glasgow, LLC v. La Grange Properties, LLC, 2012 WL 2106945 at *8 (Del. Super.
Ct. June 6, 2012) (“To be viable, the tort claim must involve violation of a duty which arises
by operation of law and not by the mere agreement of the parties.”).

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society.17 And it is the alleged breach of these legal duties upon which International
Vitamin’s tort claims are based.18
Next, Perrigo argues that International Vitamin’s tort claims are barred by
§ 4.28 of the Asset Purchase Agreement. This Court disagrees. It is true that § 4.28
states (1) that “the purchased assets are transferred ‘as-is where-is’”; (2) that there
was “no representation or warranty . . . with respect to . . . the purchased assets . . .
[or] any information provided or made available to [International Vitamin] in
connection with the” sale; and (3) that “all other representations or warranties are
hereby expressly disclaimed.”19 Another provision of the contract, however—which
this Court cannot treat as “mere surplusage”20—explicitly reserves International

17

OC Tint Shop, Inc. v. CPFilms, Inc., 2018 WL 4658211 at *5 (D. Del. Sept. 27, 2018) (“[I]f
an alleged contractual breach is accompanied by the breach of an independent duty imposed
by law, the same factual assertions may support both a breach of contract and tort claim.”).

18

OC Tint Shop, Inc., 2018 WL 4658211 at *6 (holding that the plaintiff’s fraud-based claims
were based upon independent legal duties and were therefore not impermissibly duplicative of
plaintiff’s breach of contract claims).
Perrigo also argues that International Vitamin failed to specifically plead these legal duties in
its counterclaims.
Perrigo points to no authority, however, that requires such
hypertechnicalities.
To the extent that Perrigo is arguing that it can escape liability for intentional concealment
because it had no duty to speak about the business before the sale, it is well-established that,
“if a person undertakes to speak, he then has a duty to make a full and fair disclosure as to the
matters about which he assumes to speak.” Lock v. Schreppler, 426 A.2d 856, 862 (Del. Super.
Ct. 1981). In other words, once Perrigo decided to relate information about the business during
the parties’ negotiations, it had a duty to relate accurate information.

19

ECF No. 34.

20

Kuhn Construction, Inc. v. Diamond State Port Corp., 990 A.2d 393, 397 (Del. 2010).

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Vitamin’s rights “in the case of fraud.”21 Therefore, § 4.28 cannot be read as barring
International Vitamin’s tort claims, both of which are based on fraud.
Finally,22 Perrigo argues that International Vitamin’s tort claims are barred by
the economic loss doctrine. While this doctrine does generally “limit[] a contracting
party’s ability to recover in tort to losses accompanied by bodily harm or property
damages and prohibits recovery for losses that are solely economic in nature,”23 there
are certain exceptions to this doctrine, including for claims of fraudulent inducement
and intentional concealment.24 This is not a ground, therefore, on which to dismiss
International Vitamin’s tort claims.

21

Asset Purchase Agreement § 5.8(b).

22

In its Reply Brief (ECF No. 41), Perrigo argues that International Vitamin’s claims should be
dismissed because of the “gist-of-the action” doctrine. Because this argument was raised for
the first time in a reply brief, this Court may consider it waived. Teleconference Systems v.
proctor & Gamble Pharmaceuticals, Inc., 676 F. Supp. 2d 321, 331 n.13 (D. Del. 2009)
(“Issues raised for the first time in a reply brief should not be heard.”).
Even if this Court were to consider the argument, however, it would consider the argument
meritless, since—as discussed above—International Vitamin is alleging more than mere
breach of contract. See Livery Coach Solutions, LLC v. Music Express/East, Inc., 245 F. Supp.
3d 639, 644 (D. Del. 2017) (noting that the doctrine “precludes tort suits for mere contractual
breaches, requiring a plaintiff to point to independent events giving rise to the tort”); Aviation
West Charters, LLC v. Freer, 2015 WL 5138285 at *6 (Del. Super. Ct. July 2, 2015) (noting
the distinction between claims alleging fraudulent inducement to contract and claims alleging
breach of contract).

23

OC Tint Shop, Inc., 2018 WL 4658211 at *6.

24

Id.

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Disposition
IT IS HEREBY ORDERED that:
1.

Perrigo Corporation’s Motion to Dismiss, ECF No. 21, is DENIED AS
MOOT.

2.

Perrigo Corporation’s Motion to Dismiss, ECF No. 32, is DENIED.

3.

International Vitamin Corporation’s Request for Oral Argument, ECF
No. 42, is DENIED.

4.

Perrigo Corporation’s answer to International Vitamin Corporation’s
counterclaims is due within 14 days of the date of this Order.

BY THE COURT:

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

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