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Perrigo Co. v. International Vitamin Co.

United States District Court, D. Delaware

January 29, 2019

PERRIGO COMPANY, Plaintiff.
v.
INTERNATIONAL VITAMIN COMPANY, Defendant.

          MEMORANDUM OPINION AND ORDER

          MATTHEW W. BRANN UNITED STATES DISTRICT JUDGE

         Perrigo Company moved to dismiss some of the counterclaims raised by the International Vitamin Corporation. That motion will be denied.

         Background

         Perrigo manufactures over-the-counter pharmaceutical products.[1] On June 17, 2016, it sold one of its product lines to International Vitamin.[2] The terms of that sale were memorialized in an Asset Purchase Agreement.[3]

         At the time of the sale, there was a class action suit pending in California that related to one of the products in the transferred product line.[4] Under the terms of the Agreement, International Vitamin agreed to assume all future liability arising from that matter.[5] After the class action suit resolved, however, International Vitamin refused to do so.[6] This lawsuit followed.

         After Perrigo filed a complaint alleging that International Vitamin had breached its contractual indemnification duties, International Vitamin responded with several counterclaims.[7] In those counterclaims, International Vitamin alleged that, prior to the sale, Perrigo told International Vitamin that the class action plaintiffs had offered to settle for “a few hundred thousand dollars, ” when in fact those plaintiffs had never offered to settle for less than two million dollars.[8]International Vitamin also alleged that, during negotiations, Perrigo failed to disclose several hundred thousand dollars in “store allowance fees” charged by one of the customers of the transferred product line.[9] These two acts, International Vitamin argued, were deliberate misrepresentations or intentional concealment of the truth, and as such, constituted actionable torts-specifically, fraud and intentional concealment.[10] International Vitamin also included a breach of contract counterclaim for Perrigo's alleged failure to disclose certain liabilities at closing, in violation of the Asset Purchase Agreement.[11] Perrigo moved to dismiss the tort-based counterclaims on November 29, 2018.[12]

         Discussion

         Perrigo argues that International Vitamin's tort claims are really breach of contract claims in disguise and are therefore barred by Delaware law.[13] Perrigo approaches this argument from two angles.

         First, Perrigo argues that the damages alleged in the tort claims are duplicative of the damages alleged in the breach of contract claim.[14] This Court disagrees. In its breach of contract claim, International Vitamin alleges that Perrigo breached the Asset Purchase Agreement by failing to disclose certain outstanding liabilities at closing (some of which happened to be outstanding “store allowance fees” mentioned above), which-because of a specific provision in that agreement- caused International Vitamin to overpay Perrigo by the exact amount of those undisclosed liabilities.[15] The alleged contractual damages, then, are the exact amount of those undisclosed liabilities. In its tort claims, by contrast, International Vitamin alleges that Perrigo, through fraud or intentional concealment, caused International Vitamin to agree to an inflated overall price for the transferred business. The alleged tort damages, then, are the exact amount the “true” price was inflated by Perrigo's deception. Though all claims rest on International Vitamin's dissatisfaction with paying too much for the transferred business, the tort and breach of contract claims seek to recover separately overpaid amounts.

         Second, Perrigo argues that any duty owed to International Vitamin by Perrigo arose solely from the Asset Purchase Agreement. This Court disagrees. It is true that a tort claim cannot be based solely on a violation of a contractual duty.[16] The law itself, however, imposes a number of independent duties on private actors in our society.[17] And it is the alleged breach of these legal duties upon which International Vitamin's tort claims are based.[18]

         Next, Perrigo argues that International Vitamin's tort claims are barred by § 4.28 of the Asset Purchase Agreement. This Court disagrees. It is true that § 4.28 states (1) that “the purchased assets are transferred ‘as-is where-is'”; (2) that there was “no representation or warranty . . . with respect to . . . the purchased assets . . . [or] any information provided or made available to [International Vitamin] in connection with the” sale; and (3) that “all other representations or warranties are hereby expressly disclaimed.”[19] Another provision of the contract, however-which this Court cannot treat as “mere surplusage”[20]-explicitly reserves International Vitamin's rights “in the case of fraud.”[21] Therefore, § 4.28 cannot be read as barring International Vitamin's tort claims, both of which are based on fraud.

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

         Disposition

         IT IS ...


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