Impax Laboratories, Inc. v. Turing Pharmaceuticals AG

Filing 110

MEMORANDUM AND OPINION re: 92 MOTION for Partial Summary Judgment, 78 MOTION for Summary Judgment: Impax Laboratories, Inc. ("Impax") brought this action for declaratory judgment, breach of contract, and unjust enrichment aga inst Turing Pharmaceuticals AG ("Turing") on May 2, 2016, seeking to recover millions of dollars of rebate liability related to sales of the drug Daraprim. Turing counterclaimed, asserting breach of the same contract and breach of the duty of good faith and fair dealing. Pending before the Court are (1) Impax's motion for summary judgment on one of its breach of contract claims against Turing (Count 3) and Turing's counterclaims, Doc. 78, and (2) Turing's cross-motion fo r summary judgment on Impax's claim for declaratory judgment, Impax's breach of contract claims, and Turing's breach of contract counterclaim against Impax, Doc. 92. For the reasons set forth above, Impax's motion is GRANTED in pa rt and DENIED in part, and Turing's motion is GRANTED in part and DENIED in part. The parties are directed to appear for a status conference on October 18, 2017 at 2:30pm at the United States Courthouse, 40 Foley Square, Courtroom 619, New York, NY 10007. The Clerk of the Court is respectfully directed to terminate the motions, Docs. 78, 82, 92, and 96. (Signed by Judge Edgardo Ramos on 9/28/2017) (jwh)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
IMPAX LABORATORIES, INC.,
Plaintiff,
-against-

OPINION AND ORDER
16 Civ. 3241 (ER)

TURING PHARMACEUTICALS AG,
Defendant.

Ramos, D.J.
Impax Laboratories, Inc. (“Impax”) brought this action for declaratory judgment, breach
of contract, and unjust enrichment against Turing Pharmaceuticals AG (“Turing”) on May 2,
2016, seeking to recover millions of dollars of rebate liability related to sales of the drug
Daraprim. Turing counterclaimed, asserting breach of the same contract and breach of the duty
of good faith and fair dealing. Pending before the Court are (1) Impax’s motion for summary
judgment on one of its breach of contract claims against Turing (Count 3) and Turing’s
counterclaims, Doc. 78, and (2) Turing’s cross-motion for summary judgment on Impax’s claim
for declaratory judgment, Impax’s breach of contract claims, and Turing’s breach of contract
counterclaim against Impax, Doc. 92. For the reasons discussed below, Impax’s motion is
GRANTED in part and DENIED in part, and Turing’s motion is GRANTED in part and
DENIED in part.

I.

Factual Background 1
A. The Medicaid Drug Rebate Program
Impax and Turing are both drug manufacturers. See Defendant’s Memorandum of Law in

Opposition to Plaintiff’s Motion for Partial Summary Judgment and in Support of Cross-Motion
for Summary Judgment (“Def.’s Mem.”) at 5. A drug manufacturer typically does not sell a drug
directly to patients. Def.’s 56.1 ¶ 26. Instead, a drug manufacturer primarily sells a drug through
wholesalers and distributers, who then sell the drug to providers such as retail pharmacies or
hospitals. Id. Subsequently, a pharmacy or hospital provides the patient with the drug, and the
patient’s insurer (such as Medicaid) reimburses the pharmacy or hospital for that drug. Id. The
process of distribution of the drug to a patient and payment by the insurer is known as
“utilization.” Id. ¶ 27.
In order for a prescription drug to be eligible for Medicaid coverage, the manufacturer of
the drug must participate in the Medicaid Drug Rebate Program—a program designed to help
lower Medicaid spending on outpatient prescription drugs—and enter into a Medicaid Rebate
Agreement with the U.S. Department of Health and Human Services (“HHS”). Pl.’s 56.1 ¶ 4;
Def.’s 56.1 ¶ 30; Amended Complaint (“Am. Compl.”) ¶¶ 16–17. Under the program, state
Medicaid agencies cover the cost of the drug dispensed to eligible patients, and then collect a
rebate from the manufacturer for each unit of drug utilized during a calendar quarter. Pl.’s 56.1 ¶
7; Def.’s 56.1 ¶ 30. Each drug is linked to its manufacturer through its unique National Drug

1

The following facts are drawn from the Amended Complaint, Doc. 34, Plaintiff’s Rule 56.1 Statement of
Undisputed Material Facts (“Pl.’s 56.1”), Doc. 83, Defendant’s Rule 56.1 Statement of Undisputed Material Facts
(“Def.’s 56.1”), Doc. 94, and the parties’ supporting submissions.

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Code (“NDC”), part of which represents the manufacturer’s unique labeler code. Pl.’s 56.1 ¶ 7;
Defs.’ 56.1 ¶ 32; Am. Compl. ¶ 1.
A manufacturer’s rebate liability for a covered drug (“Medicaid Rebate Liability”) is
calculated by the Centers for Medicare and Medicaid Services (“CMS”) using a statutory
formula and certain pricing information (“Pricing Data”) submitted by the manufacturer on a
monthly and quarterly basis. See Pl.’s 56.1 ¶ 4, 8–9; Def.’s 56.1 ¶ 31; Am. Compl. ¶¶ 16–17. A
manufacturer submits the Pricing Data through the online Drug Data Reporting for Medicaid
(“DDR”) system maintained by CMS. Pl.’s 56.1 ¶ 8. One of the components of the Pricing Data
that a manufacturer must submit to CMS is the average manufacturer price (“AMP”) for each
calendar quarter. Pl.’s 56.1 ¶ 10; Def.’s 56.1 ¶ 35. A drug’s AMP represents the average price
paid to the manufacturer by (1) wholesalers that distributed the drug to retail community
pharmacies, and (2) retail community pharmacies that purchased the drug directly from the
manufacturer. 2 Def.’s 56.1 ¶ 35. Manufacturers are not required to use a particular methodology
for calculating AMP. Def.’s 56.1 ¶ 36.
One methodology available to manufacturers to calculate AMP is the presumed inclusion
methodology, which presumes that all sales of a drug to wholesalers are includable in AMP,
except for those sales for which there is “adequate documentation” to the contrary. 3 Pl.’s 56.1 ¶
67. Another methodology is the buildup methodology, pursuant to which a manufacturer only

2

A retail community pharmacy is defined as “an independent pharmacy, a chain pharmacy, a supermarket pharmacy,
or a mass merchandiser pharmacy that is licensed as a pharmacy by the State and that dispenses medications to the
general public at retail prices. Such term does not include a pharmacy that dispenses prescription medications
to patients primarily through the mail, nursing home pharmacies, long term care facility pharmacies, hospital
pharmacies, clinics, charitable or not for profit pharmacies, government pharmacies, or pharmacy benefit
managers.” Social Security Act § 1927(k)(10) (emphasis added); Bates Report, n. 50.

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An example of a sale that would be ineligible for inclusion in the AMP is a sale to a specialty pharmacy that
provides medications to patients primarily through the mail. Bates Report, ¶ 51.

3

includes in its AMP calculation those sales for which there is adequate, verifiable documentation
showing that the drug was actually distributed to a retail community pharmacy either directly or
indirectly through the wholesaler. Id.; Def.’s 56.1 ¶ 37. As Impax points out, CMS has stated
that it “believe[s] the better alternative for calculating AMP is the presumed inclusion approach.”
Pl.’s Response to Def.’s 56.1 ¶ 37; CMS Final Rule, 81 Fed. Reg. 5210.
CMS uses the AMP, among other things, to calculate a unit rebate amount (“URA”) for
each drug and transmits that information to the states. Pl.s 56.1 ¶ 11. Each state Medicaid
agency then uses the data to calculate on a quarterly basis the rebate due from each manufacturer,
by multiplying the state Medicaid utilization during that quarter times the URA in effect for that
quarter. Id. ¶ 12. Because there is only one URA in effect for each quarter, manufacturers must
pay that entire URA on each unit of the prescription drug bearing their labeler code that is paid
for by a state Medicaid coverage program in that quarter—regardless of the price at which each
unit was sold by the manufacturer and regardless of the amount a particular state paid to cover
utilization of that unit. Id. ¶ 14. According to Impax, if a manufacturer fails to certify the
Pricing Data or pay the Medicaid Rebate Liability due, it may be subject to, among other things,
exclusion from the program, resulting in its drugs no longer being eligible for Medicaid
coverage. Am. Compl. ¶ 21.
B. Impax Acquires Daraprim
In March 2015, Impax acquired all outstanding shares of common stock of Tower
Holdings, Inc. and certain of its subsidiaries, including Amedra Pharmaceuticals LLC
(“Amedra”), for approximately $691.3 million. Def.’s 56.1 ¶ 1. By way of this transaction,
Impax acquired the U.S. marketing rights for Daraprim, an antiprotozoal medication mainly used
to treat toxoplasmosis, a high risk and often times life-threatening disease for those affected by
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HIV, AIDS, cancer, and other diseases weakening the immune system. Am. Compl. ¶¶ 14.
Impax also acquired certain inventory of Daraprim, labeled with Amedra’s labeler codes, and
assumed Amedra’s obligations under its Medicaid rebate agreement with HHS. Id. ¶ 16. Impax
did not consider Daraprim a “strategic” part of its acquisition, and Daraprim was not part of its
“core” business model. Def.’s 56.1 ¶ 2.
Prior to Impax’s acquisition of the rights to Daraprim, Amedra had entered into and
implemented an exclusive distribution agreement with Walgreen Co. (“Walgreens”) for the
distribution of Daraprim (the “Walgreens Distribution Agreement”). Def.’s 56.1 ¶¶ 4–5; Pl.’s
Response to Def.’s 56.1. After acquiring Daraprim, Impax continued the exclusive distribution
model with Walgreens. Id.
C. Turing Acquires Daraprim
On April 22, 2015, Turing sent Impax a proposed offer to purchase Daraprim for $60
million—an amount that was six times Turing’s estimate of Daraprim’s annual net sales for
2014—and a term sheet representing “the current thinking of the parties.” See Def.’s 56.1 ¶ 9;
Pl.’s Response to Def.’s 56.1. During the negotiation of the Daraprim deal, Impax determined
that it would have to increase the price of Daraprim by 300% to give Daraprim a net present
value that was at least as much as what Turing was offering. Def.’s 56.1 ¶ 12. By July 21, 2015,
Impax agreed to sell the rights to Daraprim to Turing for $55 million, eleven times Daraprim’s
2014 annual net sales. Id. ¶ 13.
On August 7, 2015, Impax and Turing executed the Asset Purchase Agreement (the
“APA”) for the sale of the rights to Daraprim; the transaction closed on August 10, 2015 (the
“Close”). Pl.’s 56.1 ¶ 1; Def.’s 56.1 ¶ 17. In addition to the rights to Daraprim, Impax

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transferred inventory of 12,521 100-count bottles of Amedra-labeled Daraprim (the “Inventory”)
to Turing. Pl.’s 56.1 ¶ 1. Rather than require Turing to repackage the Inventory with Turing’s
own labeler codes right away, the APA permitted Turing to sell the Inventory labeled with
Amedra’s NDCs during a contractually prescribed timeframe (the “Sell-Off Period”). Id. at ¶ 2;
APA § 8.5(a).
Under the Medicaid rebate program, state Medicaid agencies collect Medicaid Rebate
Liability from the manufacturer under whose labeler code an NDC is registered. See Pl.’s 56.1 ¶
12. Thus, Impax remained responsible for paying, in the first instance, all Medicaid Rebate
Liability with respect to Amedra-labeled Daraprim. See Plaintiff’s Memorandum of Law in
Support of Motion for Partial Summary Judgment (“Pl.’s Mem.”) at 2. The parties agreed that
Turing would, in turn, reimburse Impax for certain Medicaid liabilities. See Def.’s 56.1 ¶ 20–21;
Pl.’s Mem. at 2; APA § 9.2, Ex. E. This litigation concerns, in part, Impax and Turing’s
disagreement on the extent of Turing’s reimbursement obligations under the APA.
In addition to paying Medicaid Rebate Liability invoices in the first instance, Impax
remained obligated to certify the Pricing Data to CMS for Turing’s sales of Amedra-labeled
Daraprim. Pl.’s Mem at 1; Def.’s Mem. at 6; Pl.’s 56.1 ¶ 18; Def.’s 56.1 ¶ 34. Because Impax
does not have access to Pricing Data for Turing’s sales of Amedra-labeled Daraprim, Turing
agreed to provide Impax with certified monthly and quarterly Pricing Data for Amedra-labeled
Daraprim, which Impax is then responsible for reporting to CMS by entering it into the DDR
system in accordance with CMS guidelines. 4 Pl.’s 56.1 ¶¶ 17–18.

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Impax claims that Turing failed to provide Pricing Data for the months of October and November 2015 and
January, February, and March 2016, and certain quarterly data late and only after repeated demands. Am. Compl. ¶¶
61, 84. According to Impax, this has “forced Impax to file data with CMS based on its best knowledge and without

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D. Turing’s Price Increase and its Effect on Medicaid Rebate Liability
On August 11, 2015—one day after the Close of the APA—Turing raised the price of
Daraprim from Impax’s price of $17.63 per pill to $750 per pill. Pl.’s 56.1 ¶ 21. The parties
agree that the APA placed no limitation on Turing’s right to increase the price of Daraprim.
Def.’s 56.1 ¶ 19. However, Turing’s price increase had significant effects on Daraprim’s AMP
and the amount of Medicaid Rebate Liability invoiced by the state Medicaid agencies.
On October 28 and 29, 2015, Turing provided Impax with its certification of Pricing Data
for the third quarter of 2015 (“Q3 2015”)—including a quarterly AMP of $750—which Impax
certified to CMS. 5 Pl.’s 56.1 ¶¶ 24–25. Based on that quarterly AMP, CMS calculated a
quarterly URA for Daraprim of $750. Id. ¶ 25. As stated, CMS calculates a single URA for each
drug manufacturer code for a given calendar quarter, which is used to calculate rebate liability
for all Medicaid utilization of that drug during that quarter. Id. ¶ 26. Therefore, the $750 URA
for Q3 2015—July, August, and September 2015—set the rebate price for all Daraprim utilized
under Medicaid for that quarter, including Daraprim that was utilized before the August 10, 2015
Close. Id. According to Impax, Turing’s increased price generated an increase in the Medicaid
Rebate Liability Impax owed on Daraprim utilized before the Close. Pl.’s Mem. at 13. Turing
disputes Impax’s assertion that Medicaid Rebate Liability on pre-Close utilization would have
been lower had Turing not increased the price of Daraprim. Def.’s Mem. at 19.

the certainty that compliance with the Purchase Agreement was designed to provide,” exposing Impax to
reputational harm and regulatory action. Id. ¶ 62, 64.
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Beginning in the third quarter of 2015, Turing calculated the Pricing Data for Daraprim using Medical
Communications Technologies, Inc. (“MedComm”), a firm run by Randall Perry (“Perry”), who was authorized to
report and certify the Pricing Data to Impax. Pl.’s 56.1 ¶ 22–23.

7

State Medicaid agencies have invoiced Impax over $19 million in Medicaid Rebate
Liability with respect to Daraprim for Q3 2015. 6 Pl.’s 56.1 ¶ 27. On January 15, 2016, Impax
sent Turing an invoice seeking reimbursement of approximately $17.8 million in Medicaid
Rebate Liability for Q3 2015 (the “January Invoice”). Id. ¶ 28. The January invoice allocated
Medicaid Rebate Liability between Impax and Turing in two steps. Id. ¶ 29. First, because
Impax held the rights to Daraprim for 41 out of 92 days in Q3 2015, Impax took the total number
of Daraprim units that state Medicaid agencies paid for in that quarter—in other words,
Daraprim that was “utilized” in that quarter—and (1) assigned a prorated number of those units
to Impax in a proportion to 41/92, and (2) assigned the remainder of those units to Turing. Id.
For the units allocated to Turing, Impax assigned all Medicaid Rebate Liability at the $750 URA.
Id. Second, in order to account for the fact that Turing’s price increase resulted in an incremental
increase in the URA applicable to the units allocated to Impax, the invoice (1) assigned Rebate
Liability on those units to Impax at a URA of $14.47 (i.e., the URA equivalent to the last
monthly AMP calculated by Impax prior to the Close, based on its own pricing of Daraprim), and
(2) assigned the remainder (the “incremental rebate liability”) to Turing. Id. ¶ 30.
On February 1, 2016, Turing provided and Impax certified an AMP of approximately
$719.40 for the fourth quarter of 2015 (“Q4 2015”). Id. ¶ 34. Based on the URA calculated by
CMS, the state Medicaid agencies have invoiced Impax approximately $11.5 million in Medicaid
Rebate Liability for Q4 2015. Id. ¶ 36. On March 1, 2016, Impax invoiced Turing for an
additional $2.4 in Medicaid Rebate Liability reimbursement for Q3 2015 and Q4 2015 (the
“March Invoice”). Id. ¶ 37. The March Invoice allocated Medicaid Rebate Liability in the same

6

According to Impax, had those units been invoiced to Impax based on Daraprim’s pre-APA pricing, the total rebate
liability for this period would have been just under $375,000. Am. Compl. ¶ 30.

8

manner as the January Invoice, except that all Rebate Liability on Daraprim utilized and paid for
by the state Medicaid agencies in Q4 2015 was assigned to Turing. Id. ¶ 38. On April 19, 2016,
Impax sent Turing a third invoice requesting an additional $10.2 million in previously
unaccounted-for Q3 2015 and Q4 2015 Medicaid Rebate Liability. Id. ¶ 40.
Turing similarly provided and Impax certified Pricing Data in April and July 2016,
representing the first and second quarters of 2016. Pl.’s 56.1 ¶¶ 43–44, 49. Based on that
Pricing Data and CMS’s corresponding calculations, the state Medicaid agencies have invoiced
Impax approximately $14 million in Daraprim Medicaid Rebate Liability. Id. ¶¶ 45, 50–51. In
turn, Impax has billed Turing approximately $13 million in reimbursements for those quarters.
Id. ¶¶ 46, 52.
Since the Close of the APA, the state Medicaid agencies have invoiced Impax a total of
$45,412,214.07 in Medicaid Rebate Liability with respect to Daraprim. Id. ¶ 54. Impax has
invoiced Turing a total of $43,434,170.13 in reimbursements. Id. To date, Impax’s invoices
remain outstanding. See id. ¶¶ 33, 39, 42, 48, 55.
E. Turing Demands a Restatement of the Pricing Data
After receiving the January Invoice, Turing consulted counsel at Reed Smith LLP (“Reed
Smith”) and engaged the Berkeley Research Group (“BRG”) to assess the Pricing Data that
Impax had submitted to CMS. Def.’s 56.1 ¶ 66. On February 16, 2016, Impax sent Turing a
letter demanding that Turing pay the January 2016 invoice. Am. Compl. ¶ 34. Instead of
responding to the letter, on March 22, 2016, Turing sent Impax a memorandum from Reed Smith
suggesting that Turing may have miscalculated the AMP, potentially resulting in an
overstatement of the total Medicaid Rebate Liability invoiced to Impax by the states and Turing’s

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share of that liability. Naftalis Decl. Ex. 31, TURING0004588. Turing also forwarded three
alternative models prepared by BRG purportedly calculating the parties’ respective rebate
liability. Def.’s 56.1 ¶ 67. Turing told Impax that BRG’s third model—which showed a total
Medicaid Rebate Liability for Q3 2015 of $354,000 (significantly less than the original amount
of upwards of $18 million invoiced by the state Medicaid agencies)—was the most appropriate
alternative. Id.
By April 2016, Turing informed Impax that it had concluded that the Pricing Data it
provided to Impax—and that Impax had certified to CMS—for Q3 and Q4 2015 was incorrect
and that Impax should restate that Pricing Data. Def.’s Mem. at 8–9; Def.’s 56.1 ¶¶ 67–68.
According to Turing, in Q3 and Q4 2015, state Medicaid agencies paid a total of $12.6 million
for Daraprim, but—based on the erroneous numbers submitted by Turing to CMS via Impax—
invoiced $31.1 million in rebates, resulting in a windfall to state Medicaid agencies of $18.5
million. Def.’s Mem. at n. 30.
On June 15, 2016, Turing formally demanded that Impax restate and recertify the Q3 and
Q4 2015 Pricing Data (the “Restatement Demand”). Pl.’s 56.1 ¶ 62; Def.’s 56.1 ¶ 70.
Specifically, Turing demanded that Impax submit a restated AMP of approximately $14, a
number significantly lower than the AMPs of $750 and $719.40 that Impax had previously
submitted. 7 Pl.’s 56.1 ¶ 62. Impax has not reported the new Pricing Data. Def.’s 56.1 ¶ 74.

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Turing asserts that it reached this conclusion by using the build-up methodology, instead of the presumed inclusion
methodology that its vendor, MedComm, originally used. According to Turing, MedComm’s original calculations
were “replete with errors” that led to overstated rebate liability. Turing claims that in correcting the erroneous
Pricing Data, it determined that the buildup methodology was appropriate because Turing did not sell Daraprim to
any retail community pharmacies during the relevant time period. Using the buildup approach, Turing determined
that none of its sales of Daraprim in Q3 2015 and Q4 2015 qualified for inclusion in its AMP calculation because
none were to: (1) wholesalers for distribution to retail community pharmacies; or (2) directly to retail community
pharmacies. Without any AMP-eligible sales, Turing carried forward the AMP calculated for Daraprim in the
second quarter of 2015. Def.’s Mem. at 32–33.

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Together with the Restatement Demand, Turing sent Impax a check for $150,222, which
it stated reflected its share of the recalculated Medicaid Rebate Liability. Def.’s 56.1 ¶ 70;
Naftalis Decl. Ex. 34. Turing took the position that not only was the total Medicaid Rebate
Liability overstated due to a calculation error, but that Impax had not allocated responsibility for
that liability between the parties in accordance with the APA. Def.’s Mem. at 8. Impax had
allocated responsibility based on its belief that Turing is responsible for (1) all Medicaid Rebate
Liability assessed on Daraprim utilized after the Close, including Daraprim that Impax sold into
distribution channels before the Close; and (2) the increase in Medicaid Rebate Liability owed on
pre-Close utilization of Daraprim caused by Turing’s post-Close price increase (i.e., the
incremental rebate liability). Pl.’s Mem. at 6; Def.’s Mem. at 11.
Turing’s June 15, 2016 check reflected its belief that it is only responsible for Medicaid
Rebate Liability assessed on Daraprim that Turing sold into distribution channels after the Close.
See Def.’s 56.1 ¶ 70–72. Even under the proposed restatement—which, according to Turing,
results in no incremental rebate liability with respect to Daraprim utilized before the Close 8—
Turing refused to reimburse Impax for liability assessed on Daraprim sold before the Close and
utilized after the Close. See id.
II.

Procedural Background
On May 2, 2016—after Impax demanded that Turing pay its share of the Medicaid

Rebate Liability, but before Turing officially demanded that Impax restate and recertify the Q3
and Q4 2015 Pricing Data—Impax brought the instant suit against Turing, seeking a declaratory
judgment that Turing breached the APA by failing to provide timely and accurate Pricing Data,

8

See supra note 7.

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an order compelling specific performance of Turing’s reporting obligations under the APA, and
damages for Turing’s breach of the APA for, among other things, failing to reimburse Impax for
its share of Medicaid Rebate Liability. Complaint (Doc. 1). Impax also sought a temporary
restraining order and preliminary injunction ordering Turing to, among other things, stop selling
Amedra-labeled Daraprim. Id. The Court denied the requests, finding that although Impax had
established a likelihood of success on the merits, it failed to demonstrate irreparable harm. See
Doc. 31 (May 10, 2016 Transcript); Doc. 29 (May 18, 2016 Transcript). On May 24, 2016,
Turing filed its answer to the complaint, along with a counterclaim for Impax’s alleged breach of
the duty of good faith and fair dealing by refusing to engage with Turing to correct the errors in
the Pricing Data. Answer with Counterclaim (Doc. 27). The parties thereafter began discovery.
On June 24, 2016, after Turing sent Impax its June Restatement Demand, Impax amended
its complaint to add factual allegations and additional claims for breach of contract and unjust
enrichment. 9 Doc. 34. Turing answered the Amended Complaint on July 11, 2016, adding a
counterclaim for breach of contract based on Impax’s refusal to restate the Pricing Data. Doc.
43. The Court dismissed Impax’s unjust enrichment claim on November, 16, 2016. Doc. 99.
The following claims and counterclaims remain:
1) Impax’s claim for declaratory judgment that Turing breached Section 8.5 of the APA by
failing to provide accurate and timely Pricing Data (Count 1);
2) Impax’s claim for specific performance requiring Turing to perform its obligations under
the APA to provide accurate and timely Daraprim Pricing Data on an ongoing basis
(Count 2);

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Pursuant to the Walgreens Distribution Agreement, Walgreens was required, within 30 days of Turing raising the
price of Daraprim, to pay Turing for the increased value of the inventory it held on hand, including inventory
Walgreens originally purchased from Impax. Am. Compl. ¶ 28. According to Impax, Impax estimated that
Walgreens was obligated to pay Turing approximately $73,000 per 100-count bottle of Daraprim at the time of the
price increase to account for this shelf stock adjustment. Id. Impax’s claim for unjust enrichment alleged that
Turing received “a substantial windfall in the form of [Walgreen’s] payment for the increased value of the inventory
Impax sold to Walgreens that Walgreens still held on hand at the time of the price increase.”

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3) Impax’s claim that Turing breached the APA by failing to reimburse Impax for Turing’s
share of Daraprim Medicaid Rebate Liability (Count 3);
4) Impax’s claim, in the alternative, that Turing’s certification of inaccurate Pricing Data is
itself a breach of the APA (Count 4);
5) Turing’s counterclaim that Impax breached the APA by refusing to restate the Pricing
Data for Q3 and Q4 2015 (Count 1);
6) Turing’s counterclaim that Impax breached the duty of good faith and fair dealing by
refusing to restate the Pricing Data for Q3 and Q4 2015 (Count 2).
On October 14, 2016, Impax filed a motion for partial summary judgment on its claim that
Turing breached the APA by failing to reimburse Impax for its share of Medicaid Rebate
Liability (Count 3), and Turing’s counterclaims for breach of contract and the implied duty of
good faith and fair dealing (Counts 1 and 2). Doc. 78. Turing filed its opposition to Impax’s
motion one month later, together with a cross-motion for summary judgment on all of Impax’s
remaining claims (Counts 1–4) and Turing’s counterclaim for breach of contract against Impax
(Count 1). Doc. 92. The Court held oral argument on the parties’ motions on September 26,
2017.
III.

Legal Standards
To prevail on summary judgment, the movant must show that “there is no genuine

dispute as to any material fact.” Fed. R. Civ. P. 56(a). “An issue of fact is ‘genuine’ if the
evidence is such that a reasonable jury could return a verdict for the non-moving party.” Senno
v. Elmsford Union Free Sch. Dist., 812 F. Supp. 2d 454, 467 (S.D.N.Y. 2011) (citing SCR Joint
Venture L.P. v. Warshawsky, 559 F.3d 133, 137 (2d Cir. 2009)). “A ‘material’ fact is one that
might ‘affect the outcome of the litigation under the governing law.’” Id. “The function of the
district court in considering the motion for summary judgment is not to resolve disputed
questions of fact but only to determine whether, as to any material issue, a genuine factual
13

dispute exists.” Kaytor v. Elec. Boat Corp., 609 F.3d 537, 545 (2d Cir. 2010). On a summary
judgment motion, the district court “may not make credibility determinations or weigh the
evidence . . . . ‘Credibility determinations, the weighing of the evidence, and the drawing of
legitimate inferences from the facts are jury functions, not those of a judge.’” Id. at 545–46
(quoting Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)) (emphasis
omitted).
“When confronted with cross-motions for summary judgment, the Court analyzes each
motion separately, ‘in each case construing the evidence in the light most favorable to the nonmoving party.’” Peterson v. Kolodin, No. 13 Civ. 793 (JSR), 2013 WL 5226114, at *1
(S.D.N.Y. Sept. 10, 2013) (quoting Novella v. Westchester Cty., 661 F.3d 128, 139 (2d Cir.
2011)); see also Morales v. Quintel Entm’t, Inc., 249 F.3d 115, 121 (2d Cir. 2001) (“[E]ach
party’s motion must be examined on its own merits, and in each case all reasonable inferences
must be drawn against the party whose motion is under consideration.”) (citation omitted). The
Court is not required to resolve the case on summary judgment merely because all parties move
for summary judgment. Morales, 249 F.3d at 121.
IV.

Discussion
A. Impax’s Claim that Turing Breached the APA by Failing to Reimburse Impax
for Turing’s Share of Daraprim Medicaid Rebate Liability (Count 3)
Impax moves for summary judgment on its third claim, which alleges that Turing

breached the APA by failing to reimburse Impax for its share of Daraprim Medicaid Rebate
Liability. Pl.’s Mem. at 5; Def.’s Mem. at 10. Turing cross-moves for summary judgment on the
same claim.

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Under New York law, the “essential elements of a breach of contract cause of action are
the existence of a contract, the plaintiff’s performance pursuant to the contract, the defendant’s
breach of his or her contractual obligations, and damages resulting from the breach.” LaRoss
Partners, LLC v. Contact 911 Inc., No. 11 Civ. 1980 (ADS) (ARL), 2015 WL 2452616, at *6
(E.D.N.Y. May 21, 2015) (citing Canzona v. Atanasio, 118 A.D.3d 837 (2d Dep’t 2014) (internal
quotation marks omitted). A party “will not be able to prevail on its breach of contract claim
unless it . . . proves, by a preponderance of the evidence, that it performed its own obligations
under the contract.” Id.; see also Nature’s Plus Nordic A/S v. Natural Organics, Inc., 980 F.
Supp. 2d 400, 412 (E.D.N.Y. 2013) (“[I]n order to prevail on a breach of contract claim, a
plaintiff must establish performance of each of its obligations under the contract, not just those
obligations that the defendant previously cited as a basis for termination.”).
Impax and Turing agree on several key issues. They agree that (1) the APA is an
unambiguous contract, and that the proper interpretation of an unambiguous contract is a
question of law for the Court, Pl.’s Mem. at 5; Def.’s Mem. at 10; (2) the APA is an enforceable
contract, Pl.’s Mem. at 5; Pl.’s 56.1 ¶ 3; Def.’s Response to Pl.’s 56.1 ¶ 3; and (3) Turing is
responsible for at least a portion of the Medicaid Rebate Liability invoiced by the state Medicaid
agencies. Nonetheless, they dispute whether Turing is contractually obligated to pay any rebate
liability on Daraprim sold by Impax but utilized after the Close, or any part of the rebate liability
owed on Daraprim utilized before the Close in 3Q 2015.
In addition to arguing that it has not breached the APA by refusing to pay Impax’s
invoices, Turing argues—and counterclaims—that Impax itself breached the APA by refusing to
restate and recertify the Pricing Data for Q3 and Q4 2015 to CMS. Doc. 43. Because Turing
argues that Impax has not performed its own obligations under the APA, in determining whether
15

summary judgment on Impax’s breach of contract claim is proper, the Court must consider
whether Impax has itself failed to perform its obligations under the APA such that it would not be
able to prevail on its breach of contract claim.
i. Impax’s Claim that Turing Failed to Pay its Share of Medicaid Rebate
Liability
Impax argues that Turing is contractually obligated to pay: (a) all Medicaid Rebate
Liability assessed on Daraprim utilized after the Close; and (b) the incremental rebate liability
assessed on Daraprim utilized before the Close that was generated by Turing’s price increase.
Pl.’s Mem. at 6. Turing, on the other hand, argues that the APA limits Turing’s rebate obligations
to rebate liability assessed on Daraprim that Turing itself sold into distribution channels after the
Close, and that Turing is not responsible for any portion of rebate liability assessed on Daraprim
that Impax sold into distribution channels. Def.’s Mem. at 11. This, Turing asserts, includes the
incremental rebate liability assessed on pre-Close utilization caused by Turing’s price increase.
See id. at 11, 19. The Court discusses whether Turing is responsible for either category of
liability in turn.
a. Medicaid Rebate Liability assessed on Daraprim utilized after
the Close
In support of its contention that Turing is responsible for Medicaid Rebate Liability for
Daraprim sold by Impax into distribution channels before the Close but utilized after the Close,
Impax points to Section 9.2(d) and Exhibit E of the APA. Pl.’s Mem. at 6–9. Section 9.2(d)
addresses the allocation of Medicaid Rebate Liability between Impax and Turing during the SellOff Period, providing that:
[O]n and after the Closing Date, (i) [Turing] shall have responsibility and shall
assume all Liabilities for, all Rebates, Chargebacks, and Adjustments made after
16

the Closing Date for Products sold on or after the Closing Date and (ii) [Impax]
shall have responsibility to process, and assume all Liability for all Rebates,
Chargebacks, and Adjustments made after the Closing Date for Products sold prior
to the Closing Date. Exhibit E hereto sets out the roles and responsibilities for each
of [Impax and Turing] in connection with the administration of this Section 9.2
during the Sell-Off period. APA § 9.2(d).
According to Impax, Section 9.2(d)’s reference to “[p]roducts sold on or after the Closing Date”
does not specify which “sale” must occur before or after the Close (i.e., sales by Impax or
Turing, or sales further down the supply chain). In contrast, Impax argues, other provisions are
“abundantly clear on that same point.” Pl.’s Mem. at 7. For example, portions of Section 2.4
expressly cover Daraprim “sold by Buyer on or after the Closing Date” and Sections 9.2(b) and
(c) state that Impax “shall be financially responsible for returned Product . . . sold by Seller prior
to the Closing Date” while Turing “shall be financially responsible for all returned Product sold
by or on behalf of Buyer on or after the Closing Date.” Pl.’s Mem. at 7–8; APA §§ 2.4(a),
9.2(b)–(c).
According to Impax, Section 9.2(d) expressly directs the parties to Exhibit E of the APA
for “needed clarity” regarding the type of “sale” that determines the allocation of Medicaid
Rebate Liability between Impax and Turing during the Sell-Off Period. Pl.’s Mem. at 8. Exhibit
E, in turn, lists a series of “assumptions” for the Sell-Off Period, including that:
[Turing] shall be responsible for reimbursing [Impax] for all rebates on utilization
that takes place after the Close. In the event that the Close takes place in the middle
of a Quarter then [Turing] shall be responsible for a prorated amount of that
Quarter[’]s rebate invoices. APA Exhibit E (emphasis added).
Impax contends that “in calculating rebate liability, Exhibit E requires the use of the assumption
that Turing is responsible for all liability on post-Close utilization.” 10 Id. at 8. According to

10

As discussed, Exhibit E includes an “Assumption” that “[u]pon Close Buyer shall be responsible for reimbursing
Seller for all rebates on utilization that takes place after the Close.” APA Exhibit E (emphasis added).

17

Impax, Exhibit E clarifies Section 9.2(d)’s reference to liability for “Product sold [before or
after] the Closing Date”—it really means “Product utilized [before or after] the Closing Date.”
Id. Impax argues that “for [Exhibit E] to have any meaning, Turing must be held to its obligation
to pay all Medicaid Rebate Liability triggered by utilization after the Close. Any other
interpretation of the APA would render that language superfluous and would be contrary to
fundamental principles of contract interpretation.” Pl.’s Mem. at 6.
Turing, on the other hand, contends that “the APA unambiguously allocates the Daraprim
rebate obligations between the parties based on when the manufacturer sold that product into
distribution channels,” not when the product was utilized. Def.’s Mem. at 11. Turing relies on
Sections 2.4, 8.3, and 9.2(d) of the APA to support its position. Section 2.4(a) provides that:
Subject to [Turing’s] right to indemnification under Section 12.2(a), [Turing] will
assume, be responsible for and pay, perform and/or otherwise discharge when due
those Liabilities . . . directly arising out of or in connection with or primarily related
to the Transferred Assets, the use thereof, or the marketing or sale of the Product or
the use of the Transferred Product Technology by or on behalf of [Turing] or its
Affiliates, arising and related solely to periods from and after the Closing Date,
including . . . (iv) Rebates, Chargebacks, discounts, allowances, incentives and
similar payments in connection with the sale of Product on or after the Closing
Date. APA, § 2.4(a) (emphasis added).
Turing contends that Section 2.4(a)’s reference to the “sale of Product on or after the Closing
Date” actually means “the sale of Product by Turing into distribution channels.” See Def.’s
Mem. at 11. Turing makes the same argument with respect to Section 9.2(d)’s language
assigning Turing responsibility for rebates for Daraprim “sold” post-Close. Id. at 12 (“As this
provision demonstrates, the parties expressly contemplated that both Impax and Turing would
each bear responsibility for a portion of rebates depending on whether their sale of the drug into
distribution channels took place before or after the Closing Date.”).

18

Turing also argues that Section 8.3 of the APA “removes any ambiguity” about what the
terms “sale” and “sold” mean in Sections 2.4(a) and 9.2(d), respectively. Id. at 12. Turing
contends that Section 8.3 makes clear that Turing is only responsible for obligations owed to the
government on Daraprim sold by Turing, which necessarily excludes Daraprim that Impax sold
into distribution channels but was utilized after the Close. Id. Section 8.3 provides that:
Notwithstanding any agreement between the parties to the contrary, from and after
the Closing Date, except as set forth in this Agreement, [Turing] will assume control
of, and responsibility for all costs and Liabilities arising from or related to any
commitments or obligations owed to any Governmental Entity involving the
Product, only to the extent arising from or relating to Product manufactured or sold
by or on behalf of [Turing] or its Affiliates or their respective agents or assignees
on or after the Closing Date. APA § 8.3.
According to Turing, Section 8.3 applies to Medicaid Rebate Liability because it is an obligation
owed to a Governmental Entity. Def.’s Mem. at 13. Thus, Turing argues, Section 8.3 provides
that Turing is responsible for Medicaid Rebate Liability, “only to the extent arising from or
relating to [Daraprim] . . . sold by or on behalf of [Turing] . . . after the Closing Date.” Id.
(emphasis added). 11
Finally, Turing argues that Exhibit E does not require Turing to pay Impax for rebates on
Impax’s own sales of Daraprim. Def.’s Mem. at 16–17. Turing urges that Exhibit E must be
“read in the context of the APA as a whole” and considering Exhibit E’s purpose (i.e., to
designate the parties’ roles and responsibilities regarding Section 9.2 during the Sell-Off Period).
Id. at 17. Turing contends that by reading Exhibit E to only apply to Daraprim Turing sells
during the Sell-Off Period, “the terms of the APA and Exhibit E achieve a harmonious whole.”
Id. at 18. Turing also argues that Exhibit E does not purport to define the terms “sale” or “sold,”
11

Impax does not contend that Section 8.3 is inapplicable to Medicaid Rebate Liability. Pl.’s Reply at 11. Instead,
Impax argues that Section 8.3 “is effective only insofar as the APA does not set forth otherwise,” which the APA
does in both Section 2.4(a) and Exhibit E. Id. Moreover, Impax argues, Section 9.2(d) expressly refers to Exhibit
E—and not Section 8.3—for clarification. Id.

19

and that the relevant language only describes an “assumption”—“not a right, obligation, promise,
warranty, representation or undertaking of any kind.” Id. According to Turing, Exhibit E merely
reflects that the parties “took for granted” that Turing would be responsible for Medicaid Rebate
Liability assessed on its sales of Daraprim after the Close, which would necessarily also be
utilized after the Close. Id. Turing contends that in light of Sections 2.4(a), 8.3, and 9.2(d) of
the APA, that assumption is “invalid” with respect to Daraprim previously sold by Impax or
Amedra. Id.
Based on the plain language of the APA, Turing’s interpretation of the allocation of
Medicaid Rebate Liability with respect to Daraprim sold into distribution channels by Impax and
utilized after the Close is untenable. Turing’s argument that Sections 2.4 and 9.2(d) limit
Turing’s rebate liability to Daraprim sold “by Turing into distribution channels” is unconvincing
because the terms “by Turing” and “into distribution channels” are simply nowhere to be found
in the relevant provisions. Tellingly, other provisions in the APA allocating responsibilities
between Impax and Turing based on which party sold Daraprim are abundantly clear. 12
Moreover, to follow Turing’s interpretation of the “utilization” language in Exhibit E
would render it entirely superfluous. As Impax argues, Daraprim that was sold into distribution
channels after the Close is also necessarily utilized after the Close. Pl.’s Mem. at 6. If, as Turing
argues, the APA limits Turing’s obligations to rebate liability assessed on sales made by Turing
after the Close, then also making Turing “responsible for all rebates on utilization that takes
place after the Close” would be superfluous. Id. Such an interpretation would be contrary to

12
Section 2.4(a)(i) assigns to Turing liability arising from claims or lawsuits related to Daraprim sold by Turing after
the Close. Section 2.4(a)(ii) assigns to Turing liability arising from any governmental action related to Daraprim
sold by Turing after the Close. Section 2.4(a)(iii) assigns to Turing liability arising from product liability claims
relating to Daraprim sold by Turing after the Close. Section 9.2(b) provides that Turing shall be responsible for all
returned Daraprim sold by or on behalf of Turing after the Close.

20

established Second Circuit law. See, e.g., LaSalle Bank National Association v. Nomura Asset
Capital Corp., 424 F.3d 195, 206 (2d Cir. 2005) (“In interpreting a contract under New York law,
words and phrases should be given their plain meaning, and the contract should be construed so
as to give full meaning and effect to all of its provisions.”) (internal quotation marks and citation
omitted).
The Court also disagrees with Turing’s argument that Section 8.3 resolves any ambiguity
with respect to the terms “sold” and “sale” in Sections 2.4(a) and 9.2(d). Section 9.2(d), which
explicitly deals with Medicaid rebates, directs the parties to Exhibit E—and not Section 8.3—for
any necessary clarification. Indeed, Section 9.2(g) instructs that in the event of a conflict
between Section 9.2 and Exhibit E, “the provisions of Exhibit E shall govern.” Moreover,
Turing’s argument that Section 8.3 limits Turing’s responsibility to obligations arising from the
sale of Daraprim by Turing is unavailing. By its express terms, Section 8.3 provides that it is
effective only insofar as the APA does not set forth otherwise. It is evident that the parties
provided otherwise in Exhibit E. As Impax points out, “for the words [in Exhibit E] to have any
meaning, Turing must be held to its obligation to pay all Medicaid Rebate Liability triggered by
utilization after the Close.” Pl.’s Mem. at 6.
b. Medicaid Rebate Liability assessed on Daraprim utilized before
the Close
With respect to the incremental Medicaid Rebate Liability on pre-Close utilization of
Daraprim caused by Turing’s post-Close price increase, 13 Impax contends that Section 2.4(a) and
Exhibit E assign responsibility to the party that created it (i.e., Turing). Pl.’s Mem. at 13. Impax

13

Turing challenges Impax’s claim that Medicaid Rebate Liability on pre-Close utilization would have been lower
had Turing not increased the price of Daraprim. See Def.’s Mem. at 19.

21

claims that “under Section 2.4(a), Turing is responsible for its own actions.” Id. Section 2.4(a)
provides that:
[Turing] will assume, be responsible for and pay, perform and/or otherwise
discharge when due those Liabilities . . . directly arising out of or in connection
with or primarily related to . . . the marketing or sale of [Daraprim] . . . by or on
behalf of [Turing] or its Affiliates, arising and related solely to periods from and
after the Closing Date, including […]. APA § 2.4(a) (emphasis added).
Impax argues that because the Medicaid Rebate Liability assessed on Daraprim utilized before
the Close would have been significantly lower had Turing not raised the price, the incremental
rebate liability at issue “arose” from the marketing and sale of Daraprim after the Close, and is
thus Turing’s to bear. See Pl.’s Reply at 8. To be sure, Section 2.4(a) does not expressly state
that Turing is “responsible for its own actions” or that responsibilities are assigned to “the party
that created” them. The language of Section 2.4(a) is not that broad. Rather, Impax seems to
suggest that Turing is liable for the incremental rebate liability because its price increase was part
of its “marketing or sale” of Daraprim after the Close. Pl.’s Reply at 9. In its Reply, Impax cites
the dictionary definition of “marketing” as “(i) the act or process of selling or purchasing in a
market, and (ii) the process or technique of promoting, selling, and distributing a product or
service.” Id.; see also Naftalis Reply Decl., Ex. 3. Impax contends that these definitions, on
their face, include Turing’s pricing point for Daraprim. Pl.’s Reply at 9.
Impax further contends that Exhibit E also holds Turing responsible for the incremental
Medicaid Rebate Liability generated by Turing’s price increase. Pl.’s Mem. at 14. Exhibit E
provides that:
“[Turing] shall be responsible for reimbursing [Impax] for all rebates on utilization
that takes place after the Close. In the event that the Close takes place in the middle
of a Quarter then [Turing] shall be responsible for a prorated amount of that
Quarter[’]s rebate invoices.” APA Exhibit E (emphasis added).

22

Impax relies on the word “prorated” and its dictionary definition: “to divide, distribute, or assess
proportionally (i.e., in a correct or appropriate relationship between the size and position of
different parts).” Pl.’s Mem. at 14 (citing the Merriam-Webster Dictionary definitions of
“Prorate” and “Proportion”). Impax contends that in order to give “prorated” its plain meaning,
“Medicaid Rebate Liability must be distributed proportionally between Impax and Turing—with
each party bearing its fair share.” Id. at 15. According to Impax, Turing’s “fair share” includes
the additional Medicaid Rebate Liability on pre-Close utilization that Turing created by
increasing the price of Daraprim. Id.
Turing contends that even if Medicaid Rebate Liability on pre-Close utilization would
have been lower had Turing not increased the price of Daraprim, “nothing in the APA or Exhibit
E entitles Impax to shift all or a portion of its rebate liability to Turing based on Turing’s absolute
right under the APA to increase the price of Daraprim.” Def.’s Mem. at 19. First, Turing
describes the relevant portion of Section 2.4(a) as “general introductory language,” appearing to
suggest that it does not set forth any obligations and that Section 2.4(a)’s obligations are only
found in its subsections (i) through (iv). Id. at 20. Turing further argues that even if Impax could
rely on the general introductory language, Section 2.4(a) does not assign incremental rebate
liability to Turing because that liability does not arise from Turing’s marketing or sale of
Daraprim: that Daraprim was sold by Impax and “marketing” does not include Turing’s price
increase. 14 Id. Moreover, Turing argues, Section 2.4(a) “assigns liability to Turing only if it
arises and is related solely to periods from and after the [Close].” Id. Turing contends that since

14
In its Opposition memorandum, Turing contends that Impax failed to define “marketing” or explain why Turing’s
price increase should be subsumed within that term. Def.’s Mem. at 20. Turing further contends that, in any event,
Section 2.4(a)(i)-(ii) demonstrates that the term “marketing” concerns activities regulated by the FDA or other
governmental entities, and does not include pricing decisions by Turing. Id. In its Reply, Turing does not address
Impax’s contention that a price increase by Turing falls under the dictionary definition of “marketing.”

23

the rebate liability at issue is related to sales made by Impax before the Close, it is not solely
related to the post-Close period and is therefore not Turing’s responsibility. Id. at 20–21. 15
With respect to Exhibit E, Turing argues that Impax’s reliance on the word “prorate” is
misplaced. According to Turing, Exhibit E “does not mention splitting between Impax and
Turing a rebate on a particular sale of Daraprim.” Id. at 21. Instead, “proration” is needed
because both Impax and Turing sold Amedra-labeled Daraprim in Q3 2015 and certain of that
Daraprim was utilized after the Close. Id.
The Court finds that Exhibit E does not assign to Turing responsibility for incremental
rebate liability assessed on pre-Close utilization that may have been generated by Turing’s price
increase. The purpose of “proration” in the relevant portion of Exhibit E was to account for
rebate liability on Daraprim sold by Impax but utilized after the Close. The “proration” language
immediately follows the sentence stating that Turing is responsible for rebates on post-Close
utilization, indicating that it was meant to qualify and provide additional instruction on the
preceding sentence. Thus, it is evident that the “proration” language only addresses the issue of
post-Close utilization and is wholly irrelevant to the distribution of liability assessed on
Daraprim that was utilized before the Close.
However, the Court does find that pursuant to Section 2.4(a), Turing is responsible for the
incremental rebate liability assessed on pre-Close utilization arising from Turing’s price increase.
At the outset, the Court notes that the portion of Section 2.4(a) at issue is not merely “general
introductory language,” as Turing suggests. Section 1.2—which sets forth the defined terms of

15

On this point, Impax argues that the incremental rebate liability at issue did not exist before Turing raised the price
of Daraprim. Pl.’s Reply at 9. Thus, Impax argues, under any reading of Section 2.4(a), “Turing caused that
incremental liability [by raising the price of Daraprim] and must be held responsible for it.” Id.

24

the APA—provides that the word “including” will be deemed to be followed by the words
“without limitation.” Thus, the Court agrees with Impax that Section 2.4’s list of liabilities
arising or related to the post-Close time period is not exhaustive.
Based on the plain language of the relevant portion of Section 2.4(a), Turing is
responsible for the liability at issue if that liability was generated solely by Turing’s “marketing
or sale” of Daraprim. First, the Court finds that Turing’s price increase was part of its
“marketing or sale” of Daraprim. As Impax points out—and Turing does not contest in its
Reply—the dictionary defines “marketing,” in part, as the act, process, and technique of
promoting and selling a product. Price point is necessarily part of the act, process, and technique
of promoting and selling a product, and is therefore part of its marketing. 16 Second, the Court
finds that the liability at issue was generated solely by Turing’s price increase. Impax does not
seek reimbursement for the full amount of rebate liability assessed on Daraprim that was sold in
Q3 2015 and was utilized before the Close; it only seeks reimbursement for the incremental
liability, if any, that was generated by Turing’s post-Close increase. 17 That incremental liability
would not exist if Turing had not raised the price of Daraprim, and thus “arises” from Turing’s
post-Close “marketing or sale” of Daraprim. Therefore, Turing’s contention that it is not
responsible for any rebate liability on pre-Close utilization because that liability is also related to

16

Other sources explicitly include price point in the definition of “marketing.” For example, businessdictionary.com
defines “marketing” as “the coordination of four elements called the 4 P’s of marketing: (1) identification, selection
and development of a product, (2) determination of its price, (3) selection of a distribution channel to reach the
customer’s place, and (4) development and implementation of a promotional strategy.”
http://www.businessdictionary.com/definition/marketing.html (emphasis in the original). Investopedia.com also
refers to “product, place, price and promotion” as the “four P’s of marketing.”
http://www.investopedia.com/terms/m/marketing.asp.
17

According to Turing, if Impax accedes to its request to restate the Pricing Data for 3Q and 4Q 2015, there would
be no “incremental liability.”

25

pre-Close activity by Impax—i.e., it would not exist had Impax not sold the Daraprim in the first
place—is unavailing.
In sum, the Court finds that Turing is contractually obligated to reimburse Impax for (1)
all Medicaid Rebate Liability assessed on Daraprim sold into distribution channels before the
Close but utilized after the Close, and (2) any incremental rebate liability that its price increase
may have generated with respect to Daraprim utilized before the Close. 18 While Turing disputes
the total Medicaid Rebate Liability on the ground that it is based on a calculation error, the Court
finds that Turing has nevertheless breached its reimbursement obligations. Turing has repeatedly
denied any obligation to reimburse Impax for liability assessed on Daraprim sold by Impax into
distribution channels but utilized after the Close and the incremental liability generated by its
price increase. Indeed, Turing sent Impax a check that explicitly excluded reimbursement for
these categories of rebate liability. Def.’s 56.1 ¶ 70. Accordingly, Turing has breached its
reimbursement obligations under the APA by refusing to reimburse Impax for any rebate liability
assessed by the state Medicaid agencies on Daraprim sold into distribution channels by Impax
but utilized after the Close and the incremental rebate liability resulting from its post-Close price
increase.
In any event, even if Impax’s allocation of rebate liability were inconsistent with the
APA, Turing has reimbursed Impax for the liability it does accept only to the extent it is based on
the URA that would be calculated using the proposed restated Pricing Data. Def.’s 56.1 ¶¶ 71(c),
72(c) (“Turing multiplied the corrected URA (based on the Corrected Pricing Data) by the

18

This includes liability assessed on Daraprim with the NDC 52054-0330-10 (the “NDC-10 Product”). The
liabilities assigned in Sections 2.4(a) and 9.2(d) apply to “Product,” which in turn is defined as “Daraprim . . . as
such Product exists as of [August 7, 2015]. APA § 1.1. The APA does not limit these liabilities to a particular NDC,
nor does it limit their allocation to the party that placed the Daraprim into the stream of commerce.

26

number of units allocated to Turing [to arrive at the dollar amount of Turing’s share of total
Medicaid rebate liability for Q3 and Q4 2015].”). Indeed, Turing admits that it has refused to
pay Impax’s 3Q and 4Q 2015 invoices, in part, because “the total amount of Medicaid rebate
liability in those invoices was grossly inflated because it was based on an incorrect AMP . . . .”
Naftalis Decl., Ex. 28. Nothing in the APA allows Turing to refuse reimbursing Impax for
liability already invoiced by the state Medicaid agencies—and paid in the first instance by
Impax 19—pending a restatement. Pursuant to Exhibit E of the APA, Turing must reimburse
Impax for all Medicaid rebates 30 days from the date of an invoice. APA, Ex. E. Accordingly,
Turing’s restatement demand does not relieve Impax of its reimbursement obligations, and by
only reimbursing Impax based on a “corrected” URA, Turing has failed to perform under the
APA.
While the Court finds that Turing has breached the APA, in order to award summary
judgment in favor of Impax it must also determine that Impax performed its own obligations
under the APA, a question to which the Court now turns.
ii. Impax’s Performance of its Obligations under the APA
Turing contends that Impax breached and continues to breach its obligations under the
APA by refusing to restate the Pricing Data for Q3 and Q4 2015. Def.’s Mem. at 29. Impax, on
the other hand, argues that (1) the APA does not require Impax to restate Pricing Data at all, and
(2) even if the APA does require Impax to restate, it does not require Impax to submit a

19

As Impax points out—and Turing does not dispute—Impax is required to continue paying the Medicaid Rebate
Liability invoiced by the states while a restatement is pending. Pl.’s Mem. at 24.

27

restatement if Impax has subjectively reasonable concerns about the restatement. See Pl.’s Mem.
at 19–24; Pl.’s Reply at 20–27.
Impax contends that “nowhere does the APA require that Impax restate Pricing Data.”
Pl.’s Mem. at 19. Instead, Impax argues, Turing attempts to infer an obligation to restate from
Impax’s obligation to report and certify Pricing Data in the ordinary course. 20 Id. Turing, on the
other hand, contends that while the APA does not expressly refer to restatements of Pricing Data,
Impax ignores the plain language of Section 9.2(e) of the APA, which states that after the Close:
[Impax] shall maintain responsibility for reporting all information relating to
Product bearing Amedra’s NDC number or any foreign counterpart and the prices
thereof under applicable rules and regulations to the Medicaid Drug Rebate
Program . . . . APA § 9.2(e) (emphasis added).
According to Turing, one such regulation contemplated by Section 9.2(e) is 42 C.F.R. §
447.510(b), which provides that a drug manufacturer “must report to CMS any revision to AMP,
best price customary prompt pay discounts, or nominal prices for a period not to exceed 12
quarters from the quarter in which the data were due.” 42 C.F.R. § 447.510(b) (emphasis added).
As stated, the data that Turing seeks to have Impax restate is the AMP for Q3 and Q4 2015.
In light of Section 9.2(e) and the regulatory scheme it contemplates, the Court finds that
an obligation to report Pricing Data revisions, including by way of a restatement, is subsumed
within Impax’s obligation to report “all information relating to Product bearing Amedra’s NDC
number and the prices thereof . . . to the Medicaid Drug Rebate Program.” Contrary to what
Impax suggests, Section 9.2(e) does not limit Impax’s reporting obligations to information “in

20
Impax contends that “the only (oblique) reference to something akin to a restatement is Exhibit E’s requirement
that ‘[Impax] will dispute Medicaid claims upon [Turing’s] request and only for extraordinary quantities.’” Pl.’s
Mem. at 20. Impax argues that this provision is unhelpful to Turing because the hypothetical “dispute” to which it
refers concerns the number of units paid for by Medicaid in a quarter, and Turing’s basis for a restatement here is
that the Pricing Data it previously provided was “wrong.” Id. Turing does not rely on Exhibit E to establish Impax’s
restatement obligation, thus the Court need not make a determination on this point.

28

the ordinary course,” and it expressly contemplates the need to comply with applicable rules and
regulations such as 42 C.F.R. § 447.510(b), which requires the reporting of revisions to AMP.
The Court does agree with Impax that the APA does not require Impax to blindly report
any Pricing Data Turing provides. See Pl.’s Reply at 20. As Impax indicates—and Turing does
not appear to challenge—Impax is only required to report Pricing Data that is consistent with
applicable rules and regulations. See id.; Def.’s Reply at 7. Section 9.2(e) of the APA provides
that Impax “shall maintain responsibility for reporting [Pricing Data] under applicable rules and
regulations to the Medicaid Drug Rebate Program” (emphasis added), and Exhibit E provides
that Impax shall “[e]nter all applicable information into DDR and certify in accordance with
CMS guidelines.” Id. at 20 (emphasis added). Accordingly, Impax is under no contractual
obligation to submit a restatement that does not comply with applicable rules and regulations.
But it does not follow, as Impax argues, that Impax may refuse to restate if it has
“subjectively reasonable” concerns about restating, even if the Pricing Data is objectively
accurate and complies with applicable rules and regulations. Pl.’s Reply at 21 (“[I]t is
insufficient for Turing to show that Impax’s concerns are objectively wrong . . . rather, Turing
must demonstrate that they are subjectively unreasonable. In other words, Turing must show
that Impax exercised a right malevolently, for its own gain as part of a purposeful scheme
designed to deprive Turing of the benefits of the fruit of its bargain.”).
In support of its position, Impax relies on Greenwood v. Koven, 880 F. Supp. 186
(S.D.N.Y. 1995), a district court decision with a very different set of facts and legal questions
than the ones at hand. In Greenwood, contractual language gave a party authority to rescind a
sale if the party “in its sole judgment” determined that the sale may subject it to liability.
Greenwood, 880 F. Supp. at 192. In deciding that a subjective standard—and not an objective
29

one—applied in analyzing the propriety of the party’s exercise of this judgment, the court found
that the contractual language clearly indicated “that only [the party’s] judgment was to be
relevant in its determination as to potential liability.” Id. at 196–97. Thus, the court held that the
relevant question was whether the party was “honestly” dissatisfied that the sale would not
subject it to liability, not whether that dissatisfaction was objectively reasonable. Id. at 199–200.
In the instant case, the APA does not allow Impax to refuse to report Pricing Data to
CMS based on its “sole judgment.” Instead, Impax must certify information that is consistent
with CMS rules and regulations. If the data is accurate and complies with applicable rules and
regulations, then Impax must report it. 21 Accordingly, the appropriate inquiry in determining
whether Impax’s refusal to restate is a breach of the APA is whether the proposed restatement
objectively complies with applicable rules and regulations, not whether Impax has subjectively
reasonable concerns.
In its various submissions, Impax never outright contends that Turing’s proposed
restatement is inaccurate or fails to comply with applicable rules and regulations. See Pl.’s Mem.
at 21 (“[The APA] does not compel Impax to restate facially inappropriate Pricing Data
proffered by Turing where doing so could be contrary to law.” (emphasis added); Id. at 22
(“Here, the undisputed facts demonstrate that Turing’s restatement demand is both unreasonable
and could violate the law.”) (emphasis added). Instead, Impax argues that it has “reasonable and

21

Tellingly, in oral argument before this Court in connection with its request for a preliminary injunction, Impax
described its role under the APA with respect to Pricing Data as “purely ministerial” and stated that it must
“mechanically” report the data that Turing certifies to it. See Naftalis Decl. Ex. 39, May 18, 2016 Hearing
Transcript 3:1-4, 4:22-25, 5:7-9, 19:25-20:1. Impax’s contention that it may refuse certifying Pricing Data to CMS
based on its subjectively reasonable concerns is in clear tension with its previous representations regarding its
“mechanical” role in the reporting process.

30

well-founded” concerns about submitting the restatement. 22 Because Impax does not ground its
refusal to submit the proposed restatement on the basis that its methodology is contrary to
applicable rules and regulations—and instead insists that its subjectively reasonable concerns are
a sufficient basis to refuse restating—no genuine issue of material fact remains with respect to
this portion of the dispute. 23 In other words, Impax’s “strong reservations that [the restatement]
is reasonable and consistent with the intent of the Medicaid program,” Pl.’s Mem. at 26, are not a
sufficient basis to refuse submitting Turing’s proposed restatement. Impax has an obligation to
restate Pricing Data that complies with applicable rules and regulations.
Impax’s only concrete objection to the lawfulness of the proposed restatement is its
assertion that Impax sold Daraprim to Walgreens Specialty Pharmacy, which in turn transferred
16 to 17 percent of that Daraprim to local Walgreens storefronts in 3Q and 4Q 2015. Pl.’s Reply
at 24. According to Impax, these storefronts qualify as retail community pharmacies—because
they do not primarily sell prescription medicines through the mail—and are thus includable in
AMP calculations. Id. at 24–25. Impax also points out that in calculating AMP for Daraprim
sold under its own NDC in the first and second quarters of 2016, Turing included sales to those
exact same storefront pharmacies when they purchased Daraprim directly from Turing’s
wholesaler (instead of indirectly though Walgreens Specialty Pharmacy). Id. at 25.

22

For example, Impax contends that: (1) the restatement would “expose Impax to unreasonable regulatory risk”
because of its “curious” timing (Pl.’s Reply at 22–23); (2) Impax has “strong reservations that it is reasonable and
consistent with the intent of the Medicaid program for Turing to report an AMP that is entirely divorced from
Turing’s commercial prices for Daraprim” (Id. at 25–26); (3) Impax has “serious concerns” that Turing’s decision to
carry forward a prior period AMP “begs for substantial regulatory scrutiny” (Id. at 26).
23

When pressed on this issue during oral argument, Impax did not offer any particular reason for why Turing’s
methodology and proposed restatement are inconsistent with applicable CMS rules and regulations. Instead, Impax
generally characterized Turing’s restatement demand as “indefensible” and “cockamamie.”

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Walgreens Specialty Pharmacy’s subsequent transfers of Daraprim to retail community
pharmacies in 3Q and 4Q 2015 are of no consequence to Turing’s AMP calculation. See Def.’s
Reply at 9. As stated, AMP is defined as the average price paid to the manufacturer by (1)
wholesalers that distributed the drug to retail community pharmacies, and (2) retail community
pharmacies that purchased the drug directly from the manufacturer. Def.’s 56.1 ¶ 35; 42 U.S.C. §
1396r-8(k)(1)(A). Walgreen’s internal transfers do not fall into either category because (1) they
were not distributed by a wholesaler, and (2) they were not direct sales by Turing to retail
community pharmacies. This also explains Turing’s inclusion in its AMP of sales to those exact
same pharmacies in the first and second quarters of 2016: the sales were AMP-eligible in 2016
because they flowed directly from Turing to retail community pharmacies; but they were
ineligible in 2015 because they were internal transfers from Walgreens Specialty Pharmacy
fulfillment sites. Moreover, as Ms. Bates—Turing’s expert witness—suggests, that Walgreens
Specialty Pharmacy redistributed a minority of Daraprim (i.e. 16 to 17 percent) in 3Q and Q4
2015 to brick-and-mortar storefronts does not alter the fact that Walgreens Specialty Pharmacy
dispensed medications primarily through the mail, and accordingly, does not qualify as a retail
community pharmacy. See Bates Rebuttal Report ¶ 15.
In sum, the Court finds that (1) Impax’s subjectively reasonable concerns are not a
sufficient basis to refuse submitting Turing’s proposed restatement, and (2) Impax has not
established that the proposed restatement is inconsistent with applicable rules and regulations.
Therefore, the Court finds that by refusing to restate the Pricing Data for Q3 2015 and Q4 2015
as Turing requests, Impax has failed to perform its own contractual obligations and is unable to
recover on its breach of contract claim. Accordingly, Impax’s motion for summary judgment on
its breach of contract claim is DENIED and Turing’s motion is GRANTED.

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B. Turing’s Counterclaim that Impax Breached the APA by Refusing to Restate the
Pricing Data for Q3 and Q4 2015 (Counterclaim 1)
As stated, the Court has found that (1) Turing breached the APA by refusing to reimburse
Impax for Medicaid Rebate Liability assessed on Daraprim sold by Impax but utilized after the
Close and the incremental rebate liability generated by Turing’s price increase, and (2) Impax
breached the APA by refusing to restate the Pricing Data for Q3 and Q4 2015. Because Turing
has failed to perform its obligations under the APA, like Impax, Turing is unable to prevail on its
breach of contract claim against Impax as a matter of law. LaRoss, 2015 WL 2452616, at *6
(“[A party] will not be able to prevail on its breach of contract claim unless it . . . proves, by a
preponderance of the evidence, that it performed its own obligations under the contract.”).
Accordingly, Turing’s motion for summary judgment on its breach of contract claim against
Impax (Counterclaim 1) is DENIED and Impax’s motion is GRANTED.
C. Turing’s Counterclaim that Impax Breached the Duty of Good Faith and Fair
Dealing by Refusing to Engage with Turing to Correct the Errors in the Pricing
Data (Counterclaim 2)
Impax moves for summary judgment on Turing’s counterclaim that Impax breached the
duty of good faith and fair dealing on the ground that it is duplicative of Turing’s breach of
contract claim. Pl.’s Mem. at 21. “New York law . . . does not recognize a separate cause of
action for breach of the implied covenant of good faith and fair dealing when a breach of
contract claim, based upon the same facts, is also pled.” Harris v. Provident Life and Accident
Insurance Co., 310 F.3d 73, 81 (2d Cir. 2002). As Turing points out, however, where a party
relies on different facts for its claims of breach of contract and breach of the implied duty of
good faith and fair dealing, New York courts routinely permit the party to proceed on both
claims. Def.’s Mem. at 31; see also Credit Agricole Corp. v. BDC Finance, L.L.C., 135 A.D.3d
33

561, 561 (N.Y. App. Div. 2016) (allowing claims for breach of contract and breach of the duty of
good faith and fair dealing to proceed because they were sufficiently distinct). Turing contends
that its claim for breach of the implied duty of good faith and fair dealing is distinct from its
breach of contract claim because it is premised on Impax’s alleged “refusal to work
cooperatively with Turing to correct erroneous Pricing Data and rectify overstated government
obligations as to which the parties share responsibility.” Def.’s Mem. at 31.
At its core, Turing’s claim that Impax breached the duty of good faith and fair dealing is
premised on Impax’s refusal to submit the proposed restatement. See Def.’s Answer with
Counterclaims (Doc. 43) ¶ 134 (“Impax’s refusal to take action to correct the erroneous Pricing
Data it submitted to CMS, insistence that it will not take steps to correct that data . . . and threats
to influence the federal government to stop covering Daraprim under government health-care
programs are arbitrary, unreasonable, in bad faith and contrary to the public interest.). Impax’s
refusal to restate is also the basis of Turing’s breach of contract counterclaim. Thus, the Court
finds that Turing’s counterclaims are duplicative and that Turing was not entitled to plead both
claims in the instant action. Accordingly, Impax’s motion for summary judgment on Turing’s
claim for breach of the duty of good faith and fair dealing (Counterclaim 2) is GRANTED.
D. Impax’s Request for a Declaration that Turing Breached Section 8.5 by Failing
to Provide Accurate and Timely Pricing Data (Count 1)
Turing claims that it is entitled to summary judgment on Count 1 of Impax’s Amended
Complaint, which seeks a declaratory judgment that “Turing breached Section 8.5 of the APA
and that, as a result, Impax may revoke any rights Turing was granted to use the Impax NDC’s or
other Corporate Names.” Am. Compl. ¶ 80.

34

Section 8.5 of the APA grants Turing the right to sell Daraprim labeled with Impax’s
Corporate Names during the Sell-Off Period. APA § 8.5(a). In return, Turing agreed that it
would “use best efforts not to do any act which endangers, destroys or similarly affects the value
of the goodwill pertaining to [Impax’s] Corporate Names” and that it would not use Impax’s
Corporate Names in any manner “inconsistent with [Impax’s] use of the Corporate Names” or
that violates applicable law. APA § 8.5(c). Section 8.5 further states that Impax may revoke
Turing’s rights to use Impax’s Corporate Names “at any time upon breach by [Turing] of any
provision of this Section 8.5.” APA § 8.5(a).
Impax claims that Turing’s late reporting of Pricing Data on repeated occasions
“endangered Impax’s ability to comply with its own reporting obligations to CMS,” which in
turn endangered the goodwill associated with Impax’s Corporate Names and allowing Impax to
revoke Turing’s rights to use Impax’s NDCs and Corporate Names. Turing contends that it is
entitled to summary judgment because “Impax has failed to adduce any evidence that it suffered
reputational harm as a result of Turing’s reporting of Pricing Data.” According to Impax,
however, Section 8.5(a) allows Impax to revoke Turing’s rights if Turing does anything to
endanger goodwill, and does not require that Impax suffer actual reputational harm. Pl.’s Reply
at 29–30 (citing APA § 8.5(c)).
The Court agrees that Impax need not establish actual reputational harm. The plain
language of Section 8.5 allows Impax to revoke Turing’s rights under that section if Turing fails
to “use best efforts not to do any act which endangers, destroys or similarly affects the value of
the goodwill pertaining to [Impax’s] Corporate Names.” APA § 8.5(a), (c). Whether Turing used
“best efforts” and whether Turing’s reporting delays endangered the goodwill associated with
Impax’s Corporate Names are questions of fact. Moreover, material issues of fact exist regarding
35

whether Turing’s reporting delays amounted to the required endangerment. For example, Impax
points to the deposition of Mr. Kane, who testified that “[w]e [Impax] have been put in
precarious positions by being late in our reporting as a result of Turing not meeting its reporting
obligations to Impax.” Kane Dep., 107:8–11. Accordingly, Turing’s motion for summary
judgment on Impax’s claim for declaratory judgment (Count 1 of the Amended Complaint) is
DENIED.
E. Impax’s Claim for Specific Performance Requiring Turing to Provide Accurate
and Timely Pricing Data (Count 2)
Count 2 of the Amended Complaint alleges that Turing violated Section 9.2 and Exhibit E
of the APA by failing to provide monthly certified Pricing Data for certain months, and providing
some Pricing Data late and only after repeated demands. Def.’s Mem. at 39; Am. Compl. ¶ 84.
Impax, therefore, claims that it is entitled to specific performance of that provision on an
ongoing basis. 24 Am. Compl. ¶ 84.
In its cross-motion for summary judgment on this claim, Turing states—and Impax does
not dispute—that since June 15, 2016, Turing has continuously provided Impax with accurate
and timely monthly and quarterly Pricing Data. Def.’s Mem. at 39. Turing contends that to the
extent Impax bases its claims on Turing’s past reporting deficiencies, Turing cured any such
breaches and no further performance is outstanding. Id. According to Turing, specific
performance is moot because Impax already has obtained the very relief it seeks. Id. at 39–40.
Impax, on the other hand, contends that while Turing may have improved its reporting,
there is no reason to believe that it will continue to do so in the future, given Turing’s history.

24

Under Section 13.12 of the APA, Impax and Turing agreed that they would “each be entitled to seek specific
performance of [its] terms.” APA, § 13.12.

36

Pl.’s Reply at 29. According to Impax, “for months and possibly years to come, Impax must
continue relying on Turing to supply Pricing Data which Impax must report to CMS . . .
remain[ing] at the whim of a party with a proven track record of delinquency and broken
promises, without any indication of what Turing might do next.” Id. Thus, argues Impax,
summary judgment denying Impax one of the core protections to manage these risks—the right
to seek specific performance of Turing’s reporting obligations—is not appropriate. Id.
Specific performance is an equitable remedy granted by discretion of the Court. See
Lucente v. International Business Machines Corp., 310 F.3d 243, 262 (2d Cir. 2002). A court
may grant specific performance where money damages would not suffice, such as when “the
subject matter of the particular contract is unique and has no established market value.” Sokoloff
v. Harriman Estates Dev. Corp., 96 N.Y.2d 409, 415 (2001) (internal quotation marks and
citation omitted). In the instant case, it is undisputed that Turing has fully complied with its
obligations to provide timely Pricing Data to Impax since June 15, 2016. Moreover, as Turing
contends, Impax does not dispute that Turing has cured any past late reporting of Pricing Data
and—despite pointing to Turing’s prior history of late reporting—has not adduced any evidence
indicating that it is likely that Turing may fail to comply in the future. Thus, the Court finds that
granting specific performance under these circumstances—where Turing has continued to
comply with its obligation to timely report Pricing Data since June 15, 2016—is unnecessary.
See Marcus v. Lincolnshire Mgmt., Inc., 409 F. Supp. 2d 474, 478–79 (S.D.N.Y. 2006) (“A
present willingness by [defendant] to perform might well moot the claim for specific
performance.”). Moreover, as discussed, Impax is unable to prevail on any of its breach of
contract claims because, by refusing to submit the proposed restatement, it has failed to perform
its own obligations under the APA. This applies with equal force to breach of contract claims

37

seeking specific performance. Ace Securities Corp. Home Equity Loan Trust, Series 2007-HE3
ex rel. HSBC Bank USA, Nat. Association v. DB Structured Products, Inc., 5 F. Supp. 3d 543, 561
(S.D.N.Y. 2014) (“[A] plaintiff also must have substantially performed its own contractual duties
in order for a court to grant specific performance.”) (internal quotation marks and citation
omitted). Accordingly, Turing’s motion for summary judgment on Impax’s claim for specific
performance (Count 2 of the Amended Complaint) is GRANTED.
F. Impax’s Claim that Turing’s Certification of Erroneous Pricing Data is Itself a
Breach of the APA (Count 4)
Turing moves for summary judgment on Count 4 of Impax’s Amended Complaint, which
claims that “if the Pricing Data Turing originally certified to Impax for Q3 and Q4 2015 were
incorrect . . . then Turing’s certification of inaccurate Pricing Data to Impax . . . is itself a breach
of the [APA] . . . and was the but-for cause of Impax incurring (and continuing to incur) tens of
millions of dollars of liability to state Medicaid agencies that it must pay and for which it has not
been reimbursed.” Am. Compl. ¶ 100. Turing contends that Impax is not entitled to recover
because it failed to mitigate damages by refusing to restate the Pricing Data. Def.’s Mem. at 40.
Impax, on the other hand, argues that “the duty to mitigate only calls for a party to take
reasonable measures to minimize its damages, and does not require exposure to undue risk,
burden, or expense.” Pl.’s Reply at 27. According to Impax, “[b]ecause Turing’s restatement is
facially unreasonable, it also triggers no duty to mitigate, precluding summary judgment.” Id. at
27–28.
Under New York law, a plaintiff in a breach of contract action has a duty to mitigate the
damages that he incurs. U.S. Bank National Association v. Ables & Hall Builders, 696 F. Supp.
2d 428, 440 (S.D.N.Y. 2010). The plaintiff cannot recover if he failed to mitigate his damages.
38

Id. at 440–441. “This duty applies to those damages that the plaintiff could have avoided with
reasonable effort and without undue risk, burden, or expense.” Id. at 441. As Turing points out,
whether a party took reasonable measures to minimize its damages is an objective test. See Rost
v. Pfizer, Inc., 248 F.R.D. 417, 419–20 (S.D.N.Y. 2008) (“[B]ecause the second element of the
mitigation standard asks for a determination of reasonableness, the test is an objective one.
Thus, the trier of fact will be asked to examine what [plaintiff] actually did to [mitigate damages]
. . . for the purpose of determining whether, under an objective standard, his actions reflected
“reasonable efforts. . . . [Plaintiff’s] subjective motivations . . . are irrelevant to the question of
whether his conduct was objectively reasonable.”) (alteration omitted); see also Aristocrat
Leisure Ltd. v. Deutsche Bank Tr. Co. Americas, 262 F.R.D. 293, 298 (S.D.N.Y. 2009)
(“Reasonableness cannot be judged solely by looking at the subjective actions of the
[claimants].”).
As discussed above, Impax has insisted that the relevant question with respect to its
refusal to submit Turing’s proposed restatement is whether its concerns about restating are
subjectively reasonable. See Pl.’s Mem. at 19–24; Pl.’s Reply at 21. By arguing that the
proposed restatement does not trigger a duty to mitigate because its concerns are subjectively
reasonable, Impax attempts to “convert the mitigation test into a subjective one.” See Rost, 248
F.R.D. at 420. Whether Impax’s concerns about the proposed restatement are subjectively
reasonable is irrelevant to the Court’s determination of whether Impax’s actions amount to a
failure to mitigate. Thus, Impax has failed to establish that its failure to mitigate was objectively
reasonable, particularly in view of its contractual obligation to restate. Moreover, as discussed,
Impax is unable to prevail on any of its breach of contract claims because, by refusing to submit
the proposed restatement, it has failed to perform its own obligations under the APA.

39

Accordingly, Turing's motion for summary judgment on Impax's claim for breach of contract
based on incorrect Pricing Data provided by Turing (Count 4 of the Amended Complaint) is
GRANTED.
V.

Conclusion

For the reasons set forth above, Impax's motion is GRANTED in part and DENIED in
part, and Turing's motion is GRANTED in part and DENIED in part. The parties are directed to
appear for a status conference on October 18, 2017 at 2:30pm at the United States Courthouse,
40 Foley Square, Courtroom 619, New York, NY 10007. The Clerk of the Court is respectfully
directed to terminate the motions, Docs. 78, 82, 92, and 96.
It is SO ORDERED.

Dated: September 28, 2017
New York, New York

Edgardo Ramos, U.S.D.J.
United States District Judge

40