Chemence Medical Products, Inc. v. Medline Industries, Inc.
Filing
62
ORDER granting 49 Motion for Partial Judgment on the Pleadings. Signed by Judge Thomas W. Thrash, Jr on 12/4/2013. (ss)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
CHEMENCE MEDICAL
PRODUCTS, INC.,
Plaintiff,
v.
CIVIL ACTION FILE
NO. 1:13-CV-500-TWT
MEDLINE INDUSTRIES, INC.,
Defendant.
OPINION AND ORDER
The Plaintiff, a manufacturer of medical adhesives, entered into a long-term
contract to sell the adhesives to the Defendant, a distributor of medical supplies. After
the contract went into effect, the Patient Protection and Affordable Care Act imposed
a 2.3 percent tax on all medical devices. The Plaintiff initially passed this cost on to
the Defendant. The Defendant, however, refused to pay the cost and notified the
Plaintiff that the price increase was prohibited by the parties’ agreement. The Plaintiff
filed suit seeking a declaration that the medical device tax should be assessed against
the Defendant distributor. The Defendant has moved for a judgment on the pleadings
with respect to the declaratory relief, arguing that the Plaintiff is responsible for the
tax pursuant to the Act and pursuant to the agreement between the parties. Because
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
a fair interpretation of the Act indicates that the tax falls on manufacturers, the
Defendant’s motion for partial judgment on the pleadings should be granted.
I. Background
This dispute is between Chemence Medical Products, Inc. (“Chemence”), a
producer of specialized medical adhesives, and Medline Industries, Inc. (“Medline”),
a distributor of medical devices and products. The parties’ broad dispute concerns a
supply agreement entered into on August 1, 2010, under which Chemence supplies
Medline with all of Medline’s adhesive requirements (the “Supply Agreement”), and
the parties’ conduct after the agreement went into effect. Within the broad dispute,
the parties have a narrower dispute, relevant to this motion, concerning whether the
medical device tax (the “Device Tax”) imposed as part of the Patient Protection and
Affordable Care Act (“ACA”) must be imposed on the Plaintiff as manufacturer and
whether the tax may be reflected as a price increase pursuant to the Supply
Agreement.
The ACA “imposed on the sale of any taxable medical device by the
manufacturer, producer, or importer a tax equal to 2.3 percent of the price for which
so sold.” 26 U.S.C. § 4191(a). “Under section 4191(a), tax is imposed on the sale of
any taxable medical device by the manufacturer, producer, or importer of the device.”
26 C.F.R. § 48.4191-1(a). And “[t]he manufacturer, producer, or importer making the
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-2-
sale of a taxable medical device is liable for the tax imposed by section 4191(a).” 26
C.F.R. § 48.4191-1(c). The Defendant contends the Plaintiff is a manufacturer under
the ACA and is therefore liable for the Device Tax, and that the Plaintiff’s imposition
of the tax on the Defendant was a violation of the Supply Agreement.
The Supply Agreement itself provides a Transfer Price for the adhesives.
“Transfer Price” is defined as “the price per Unit that Medline will pay Chemence for
Products and Media as set forth in Section 5” of the Supply Agreement. (Def.’s Mot.
for Partial Judgment on the Pleadings, Ex. 1, the “Supply Agreement,” § 1(O)). There
is no other definition for a price term. Section 5.2 provides that “Product shall be sold
by Chemence to Medline at the Transfer Price of: $5.50 through December 31, 2012.”
(Id. at § 5.2). Chemence has the right to raise the Transfer Price if Medline failed to
purchase its minimum annual commitment, as set forth in Section 5.5. (Id. §§ 5.2,
5.5). The Supply Agreement also provided a mechanism for increasing the Transfer
Price every January 1st:
Transfer Price can change annually to reflect changes in raw material,
labor costs or manufacturing, provided Chemence gives Medline at least
thirty (30) days prior written notice, pursuant to the following formula:
Before the end of the first year of this Agreement,
Chemence will calculate and provide Medline with a
current Unit Cost (“UC”) that includes Direct Material Cost
(“DMC”), Direct Labor (“DL”) and Overhead (“OH”). A
new UC will be calculated by Chemence considering
changes in the DMC, DL, and OH on an annual basis
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-3-
commencing January 1, 2013, and each subsequent January
1st to determine the Percentage Variance (“PV”) in Unit
Cost as a positive or negative. The new Transfer Price is
determined by multiplying the current Transfer Price by the
PV.
(Id. at § 5.6). Section 5.6 further provided Medline the right to review the changes in
price and terminate the agreement within 30 days of a Transfer Price increase. (Id.)
Finally, Section 5.8 provided that:
Chemence agrees that Transfer Prices charged to Medline for the
Products shall be no less than 15% less than the lowest net price charged
for Products sold to other distributors permitted in this Agreement.
Charges to Medline pursuant to sections 5.5 and 5.6 herein above shall
not be considered in determining such best price.
(Id. at § 5.8). Chemence argues that these provisions allow it to pass the cost of the
Device Tax onto Medline.
In March 2010, Congress passed the ACA. The Supply Agreement went into
effect on August 1, 2010. In late 2012, the Plaintiff informed Medline that it intended
to charge Medline the amount of the Device Tax. And beginning on January 1, 2013,
the Plaintiff began charging Medline the tax as a line item for 2.3% of the cost of each
item purchased by Medline. (Am. Compl. ¶¶ 52, 55). Medline objected to the
increased charges and sent a letter to Chemence stating that Medline considered the
increase in price a “breach of Section 5.6 of the Supply Agreement … which only
allows the price to increase ‘to reflect changes in raw materials, labor costs or
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-4-
manufacturing.’” (Am. Counterclaim ¶ 23; Ex. 4). The Plaintiff’s counsel responded
that Chemence did not consider the newly imposed tax a price increase. (Id. at ¶ 27;
Ex. 5). Chemence states it has stopped charging Medline for the Device Tax and has
been paying the amount to the IRS itself. (Am. Compl. ¶ 59).
Chemence filed suit on February 15, 2013, and amended its complaint on
February 28, 2013. Count II of the amended complaint seeks a declaratory judgment
with respect to the assessment of the Device Tax. Specifically, Chemence seeks two
declarations: (1) “whether the [Device Tax] is a price increase according to the terms
of the Agreement or a mandatory and separate charge to Medline pursuant to law”;
and (2) if the Court determines the Device Tax is a price increase, “whether Medline
has the right to conduct an inspection of Chemence’s relevant books and records in
order to confirm the requested price increase and/or reject any such price increase and
terminate the Agreement on 30 days written notice, with no further liability pursuant
to Section 5.6.” (Am. Compl. ¶¶ 48-63).
The Defendant filed this motion seeking a partial judgment on the pleadings.
The Defendant seeks judgment on the Plaintiff’s request for declaratory relief.
Specifically, the Defendant seeks a determination that “(1) Plaintiff, the manufacturer
of the subject medical device, is not required by law to pass along to Medline, a
distributor of the subject device, the amount of the excise tax imposed on
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-5-
manufacturers of medical devices as a mandatory and separate charge; and (2) the
[device] tax is a price increase that is not permitted by the terms of the Parties’
agreement.” (Def.’s Mot. for Partial Judgment on the Pleadings, at 2).
II. Motion for Judgment on the Pleadings Standard
A motion for judgment on the pleadings is subject to the same standard as is a
motion to dismiss brought under Rule 12(b)(6) of the Federal Rules of Civil
Procedure. A complaint should be dismissed under Rule 12(b)(6) only where it
appears that the facts alleged fail to state a “plausible” claim for relief. Ashcroft v.
Iqbal, 129 S. Ct. 1937, 1949 (2009); Fed. R. Civ. P. 12(b)(6). A complaint may
survive a motion to dismiss for failure to state a claim, however, even if it is
“improbable” that a plaintiff would be able to prove those facts; even if the possibility
of recovery is extremely “remote and unlikely.” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 556 (2007) (citations and quotations omitted). In ruling on a motion to
dismiss, the court must accept factual allegations as true and construe them in the light
most favorable to the plaintiff. See Quality Foods de Centro America, S.A. v. Latin
American Agribusiness Dev. Corp., S.A., 711 F.2d 989, 994-95 (11th Cir. 1983); see
also Sanjuan v. American Bd. of Psychiatry and Neurology, Inc., 40 F.3d 247, 251
(7th Cir. 1994) (noting that at the pleading stage, the plaintiff “receives the benefit of
imagination”). Generally, notice pleading is all that is required for a valid complaint.
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-6-
See Lombard’s, Inc. v. Prince Mfg., Inc., 753 F.2d 974, 975 (11th Cir. 1985), cert.
denied, 474 U.S. 1082 (1986). Under notice pleading, the plaintiff need only give the
defendant fair notice of the plaintiff’s claim and the grounds upon which it rests. See
Erickson v. Pardus, 551 U.S. 89, 93 (2007) (citing Twombly, 550 U.S. at 555).
III. Discussion
A.
Assessment of the Device Tax
The Defendant argues that the Plaintiff is not entitled to declaratory relief
because the Device Tax is levied on the Plaintiff as a manufacturer. According to the
Defendant, the plain language of the ACA assesses the tax on the manufacturer. And
the IRS’ interpretation, as evidence by 26 C.F.R. § 48.4191-1(c), confirms that the
manufacturer bears the burden.
Although the Defendant concedes that the
manufacturer could pass on the cost of the tax, the Defendant argues that the legal
burden of the tax nevertheless falls on the manufacturer.
The Plaintiff contends that the tax should be assessed on the distributor. First,
the Plaintiff argues that the Device Tax must be borne by distributors such as Medline
because 26 U.S.C. § 4219 requires purchasers to pay the Device Tax whenever
manufacturers are untaxable.
Likewise, the Plaintiff argues that 26 U.S.C. §
4216(b)(1) requires the constructive price for tax purposes to be calculated by the
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-7-
highest wholesale price rather than the retail price, indicating that distributors such as
Medline should bear the legal incidence of the Device Tax.
The Court concludes that, based on the plain terms of the statute and its
regulations, the Device Tax is to be borne by manufacturers when, as here, the
manufacturers are taxable. The test for determining where the legal incidence of a tax
falls “is nothing more than a fair interpretation of the taxing statute as written and
applied, without any requirement that pass-through provisions or collection
requirements be ‘explicitly stated.’”
California State Bd. of Equalization v.
Chemehuevi Indian Tribe, 474 U.S. 9, 11 (1985) (citing Moe v. Confederated Salish
and Kootenai Tribes, 425 U.S. 463, 481-83 (1976)).
Here, the ACA “imposed on the sale of any taxable medical device by the
manufacturer, producer, or importer a tax equal to 2.3 percent of the price for which
so sold.” 26 U.S.C. § 4191(a). The language of the statute itself imposes a tax on the
“manufacturer, producer, or importer,” not on a distributor, like Medline, or a retailer
or a consumer. Similarly, the regulations state that, “[u]nder section 4191(a), tax is
imposed on the sale of any taxable medical device by the manufacturer, producer, or
importer of the device.” 26 C.F.R. § 48.4191-1(a). And “[t]he manufacturer,
producer, or importer making the sale of a taxable medical device is liable for the tax
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-8-
imposed by section 4191(a).” 26 C.F.R. § 48.4191-1(c). The statute itself and its
regulations plainly place the burden of the Device Tax on the manufacturer.1
The Plaintiff argues, however, that because 26 U.S.C. § 4219 requires
purchasers to pay the tax whenever the manufacturer is untaxable, the legal incidence
of the tax falls on purchasers. 26 U.S.C. § 4219 states:
In case any person acquires from the manufacturer, producer, or importer
of an article, by operation of law or as a result of any transaction not
taxable under this chapter, the right to sell such article, the sale of such
article by such person shall be taxable under this chapter as if made by
the manufacturer, producer, or importer, and such person shall be liable
for the tax.
26 U.S.C. § 4219. Contrary to the Plaintiff’s argument, this section reinforces the
Court’s conclusion that the Device Tax shall be first borne by the manufacturer.
Notably, the title of the section is “Application of tax in case of sales by other than
manufacturer or importer.” 26 U.S.C. § 4219 (emphasis supplied). The title indicates
that it is unusual for the tax to fall on an entity that is not a manufacturer or an
importer.
The Plaintiff suggests that, in California State Bd. of Equalization v.
Chemehuevi Indian Tribe, the Supreme Court held that a pass-through provision such
as the one in 26 U.S.C. § 4219 demonstrates that the ultimate burden of a tax falls on
the entity that eventually bears the tax. However, the Supreme Court in Chemehuevi
1
Chemence does not argue that it is an untaxable manufacturer.
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-9-
did not hold that a pass-through provision in a tax statute which required purchasers
to pay a tax whenever a vendor was untaxable indicated that the ultimate burden of
the tax was on the purchaser. Rather, the Court only stated that if the vendor is
untaxable, “the legal incidence of the tax [falls] on purchasers in such cases.”
Chemehuevi, 474 U.S. at 11 (emphasis supplied). Here, 26 U.S.C. § 4219 is a passthrough provision that places the legal incidence of the Device Tax on a person who
is not the manufacturer, producer, or importer when the manufacturer, producer, or
importer is untaxable. But, as in Chemehuevi, this only indicates that the legal
incidence of the tax does not fall on the manufacturer, producer, or importer in those
cases, not in all cases. In general, the fact that the manufacturer can pass along the
cost of the tax does not mean that the tax does not fall on the manufacturer. See
Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95, 103 (2005) (“While the
distributors are ‘entitled’ to pass along the cost of the tax to downstream purchasers,
… they are not required to do so. In sum, the legal incidence of [the tax] is on the
distributor.”). Because there is no indication that in this case the Plaintiff as
manufacturer of the devices is untaxable, the Device Tax must be borne by the
Plaintiff as manufacturer.
Next, the Plaintiff argues that the mechanism for calculating the price to be
taxed indicates that the Device Tax should be borne by distributors. Under 26 U.S.C.
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-10-
§ 4216(b)(1)(C), the amount to be charged is calculated as a percentage of the lower
of “(i) the price for which such article is sold, or (ii) the highest price for which such
articles are sold to wholesale distributors, in the ordinary course of trade, by
manufacturers or producers thereof, as determined by the Secretary.” This provision
does not indicate that distributors should bear the Device Tax. First, the provision is
entitled “Application of tax in case of sales by other than manufacturer or importer,”
again indicating that the tax is intended to be imposed on manufacturers. Further, the
portion of the provision that the Plaintiff relies upon is based on articles sold at retail.
The full quotation states:
In the case of an article sold at retail, the computation under the
preceding sentence shall be on whichever of the following prices is the
lower: (i) the price for which such article is sold, or (ii) the highest price
for which such articles are sold to wholesale distributors, in the ordinary
course of trade, by manufacturers or producers thereof, as determined by
the Secretary.
26 U.S.C. § 4216(b)(1)(C) (emphasis supplied). Here, the Plaintiff is a manufacturer
selling to the Defendant, a distributor. There is no retail sale involved and therefore
26 U.S.C. § 4216(b)(1)(C) should not apply. Additionally, nothing in the statute
indicates that because there might be some situations where the Device Tax needs to
be calculated based on retail sales, the incidence of the tax does not fall on the
manufacturer. Accordingly, based on a fair interpretation of the statute as written, the
Court concludes that the Device Tax falls on the Plaintiff, and the Plaintiff is therefore
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-11-
not entitled to declaratory relief in this respect. The Defendant’s motion for partial
judgment on the pleadings should be granted on these grounds.
B.
Whether Charging the Device Tax to Medline was Permitted Under the
Supply Agreement
The Defendant also seeks a judgment on the pleadings with respect to the
Plaintiff’s second request for declaratory relief. That request asks the Court to
determine whether, assuming that the Device Tax must be borne by the Plaintiff,
“Medline has the right to conduct an inspection of Chemence’s relevant books and
records in order to confirm the requested price increase and/or reject any such price
increase and terminate the Agreement on 30 days written notice,” pursuant to Section
5.6 of the Supply Agreement. (Am. Compl. ¶ 58). The Defendant argues that the
Device Tax is an increase in price not permitted by the terms of the agreement. The
Court agrees that the increase in price was not supported by the Supply Agreement,
and that the Plaintiff is not entitled to declaratory relief.
To determine whether the Supply Agreement permitted Chemence to pass on
the cost of the Device Tax to Medline, the Court must construe the Supply Agreement.
“The cardinal rule of construction is to ascertain the intention of the parties. If that
intention is clear and it contravenes no rule of law and sufficient words are used to
arrive at the intention, it shall be enforced irrespective of all technical or arbitrary
rules of construction.” O.C.G.A. § 13-2-3. “If contract language is clear and
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-12-
unambiguous, [the Court should] look only to that language to ascertain the parties'
intention.” Georgia-Pacific Corp. v. Lieberam, 959 F.2d 901, 905 (11th Cir. 1992)
(citing Hunsinger v. Lockheed Corp., 192 Ga. App. 781, 783 (1989)). “And if the
contract language is ‘plain, unambiguous and capable of only one reasonable
interpretation,’ construction of the contract is neither required nor permitted.” Id.
(citing Hunsinger, 192 Ga. App. at 783). “If, however, the contract ‘contains
provisions susceptible of more than one reasonable interpretation, it is uncertain of
meaning or expression and, thus, ambiguous.’” Id. (quoting United States Fidelity &
Guaranty Co. v. Gillis, 164 Ga. App. 278, 281 (1982)). Here, the Court concludes the
Supply Agreement is not ambiguous with respect to the Transfer Price.
As noted, the Supply Agreement sets forth a Transfer Price. “Transfer Price”
is defined as “the price per Unit that Medline will pay Chemence for Products and
Media as set forth in Section 5” of the Supply Agreement. (Supply Agreement, §
1(O)). There is no other definition for a price term. Section 5.2 provides that
“Product shall be sold by Chemence to Medline at the Transfer Price of: $5.50 through
December 31, 2012.” (Id. at § 5.2). Chemence can raise the Transfer Price if Medline
fails to purchase its minimum annual commitment, pursuant to Section 5.5. (Id. §§
5.2, 5.5). The Supply Agreement also provided a mechanism for increasing the
Transfer Price every January 1st:
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-13-
Transfer Price can change annually to reflect changes in raw material,
labor costs or manufacturing, provided Chemence gives Medline at least
thirty (30) days prior written notice, pursuant to the following formula:
Before the end of the first year of this Agreement, Chemence will
calculate and provide Medline with a current Unit Cost (“UC”)
that includes Direct Material Cost (“DMC”), Direct Labor (“DL”)
and Overhead (“OH”). A new UC will be calculated by
Chemence considering changes in the DMC, DL, and OH on an
annual basis commencing January 1, 2013, and each subsequent
January 1st to determine the Percentage Variance (“PV”) in Unit
Cost as a positive or negative. The new Transfer Price is
determined by multiplying the current Transfer Price by the PV.
(Id. at § 5.6). Section 5.6 thus provides a mechanism by which the Transfer Price can
increase from its original $5.50. That mechanism, however, by its terms only allows
for price increases based on cost changes for labor, manufacturing, or raw material.
Specifically, a new Unit Cost is calculated annually based on percentage changes in
Direct Material Cost, Direct Labor cost, and the cost for Overhead. These categories
do not allow for an increase in price due to the Device Tax because an excise tax is
not direct material cost, direct labor cost, or overhead. By their plain terms, therefore,
Sections 5.2, 5.5, and 5.6 of the Supply Agreement do not allow Chemence to pass the
Device Tax on to Medline as an increase in Transfer Price.
Chemence, however, argues that the increase in Transfer Price here is not
governed by Sections 5.2, 5.5, and 5.6 of the Supply Agreement. Rather, the
increased price is permitted under Section 5.8, which reads:
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-14-
Chemence agrees that Transfer Prices charged to Medline for the
Products shall be no less than 15% less than the lowest net price charged
for Products sold to other distributors permitted in this Agreement.
Charges to Medline pursuant to sections 5.5 and 5.6 herein above shall
not be considered in determining such best price.
(Id. at § 5.8). Chemence argues that, “[r]ead in conjunction with § 5.6 and beyond
December 31, 2012, § 5.8 permits Chemence to charge Medline any Transfer Price
so long as such Transfer Price is at least 15% less than the lowest net price charged
to other distributors.” (Pl.’s Resp. in Opp’n to Def.’s Mot. for Partial Judgment on the
Pleadings, at 6). If Section 5.6 were the only means for adjusting the Transfer Price,
then Chemence would not be able to maintain the “no less than 15% less than the
lowest net price charged to other distributors,” and Section 5.8 would be rendered
meaningless. “Thus, under § 5.6, Chemence could not decrease the Transfer Price to
maintain 15% price difference because a business decision [to reduce the price to a
different distributor] is not a change in raw material, labor costs, or manufacturing.”
(Id. at 7). Chemence argues that Section 5.8 provides the real limitation on changes
in Transfer Price and that Section 5.6 is merely an exception to the limits of Section
5.8, and further that Medline has never been charged a Transfer Price in violation of
Section 5.8.
The Court disagrees with Chemence’s reading of the Supply Agreement. A
plain reading of all of Section 5, which is entitled Price Terms of Payment, shows that
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-15-
Sections 5.5 and 5.6 provide the sole means for raising the Transfer Price. As noted,
Section 5.2 provided the initial Transfer Price and Section 5.6 provides a mechanism
by which “Transfer Price can change annually.” (Supply Agreement, § 5.6). Only
Sections 5.5 and 5.6 address an increase in the Transfer Price. Section 5.5 states that
“[i]n the event Medline fails to meet its Annual Purchase Minimums as stated in
section 6 for any given year, then the Transfer Price may be increased by Chemence
for all products purchased in the year of such deficiency” pursuant to a listed formula.
(Id. § 5.5). Section 5.6 provides that Medline can inspect Chemence’s books in order
to confirm a price increase and that Medline has the right to reject any price increase
and terminate the agreement. When reading all of Section 5 together, Section 5.8
appears only to ensure that Medline gets the best price from Chemence for the
adhesives in comparison to other distributors identified elsewhere in the Supply
Agreement. Section 5.8 likewise ensures that this discount is “no less than 15% less
than the lowest net price charged.” (Id. § 5.8). In essence, Section 5.8 provides a
maximum price that Chemence can charge Medline, restricting Chemence’s ability to
raise the Transfer Price. For example, Chemence is free to charge Medline 20% less
than it charges the other distributors, but Chemence is not free to charge Medline 10%
less than it charges its other distributors. So, if Chemence makes a business decision
to reduce the price it charges to a distributor other than Medline, Section 5.8 would
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-16-
require Chemence to also reduce the price charged to Medline in order to ensure that
Medline’s price is at least 15% less than the price charged to the other distributor. If,
on the other hand, Chemence were to charge all of its distributor customers an
increased price, say because of an excise tax on its products, without changing the
price charged to Medline, then Medline’s discount would exceed 15%, which is
permitted by Section 5.8. However, in this situation, Section 5.8 does not compel
Chemence to increase the price charged to Medline in order to maintain the 15%
discount. Nothing in Section 5.8 provides that Chemence can raise the Transfer Price
on Medline so that Chemence is closer to the maximum price it could conceivably
charge under that section. The plain terms of Section 5.8 indicate that Chemence is
agreeing to a maximum price it will charge Medline rather than securing a minimum
price to impose on Medline. Further, when the Transfer Price is raised in accordance
with costs pursuant to Section 5.6, Medline has the right to inspect Chemence’s books
and reject the price increase. It would be unreasonable for the Supply Agreement to
grant Medline the right to reject an increase in Transfer Price under one provision
when a different provision gives Chemence an unfettered right to raise the Transfer
Price. The more reasonable reading of Section 5 as a whole is that Sections 5.5 and
5.6 alone represent the mechanisms by which the Transfer Price can be raised, and that
Section 5.8 only serves to prevent Chemence from charging Medline a price too close
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-17-
to the price it charges other distributors. Because Sections 5.5 and 5.6 explicitly
address Transfer Price increases, and because nothing in Section 5.8 explicitly
empowers Chemence to increase the Transfer Price, the Court concludes that Section
5.8 does not override the Transfer Price increase provisions separately addressed in
Section 5. Accordingly, Chemence cannot impose the Device Tax on Medline as a
rise in the Transfer Price under the Supply Agreement. Chemence is therefore not
entitled to the declaratory relief it seeks in Count II of its amended complaint. The
Defendant’s motion for partial judgment on the pleadings should therefore be granted.
IV. Conclusion
For the reasons set forth above, the Defendant’s Motion for Partial Judgment
on the Pleadings [Doc. 49] is GRANTED. The Plaintiff is not entitled to declaratory
relief it seeks under Count II of its amended complaint.
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-18-
SO ORDERED, this 4 day of December. 2013.
/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge
T:\ORDERS\13\Chemence Medical Products\mjptwt.wpd
-19-
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?