United States District Court, D. Delaware
TENDYNE HOLDINGS, INC. SECURITYHOLDERS' REPRESENTATIVE COMMITTEE ON BEHALF OF THE TENDYNE HOLDINGS, INC. SECURITYHOLDERS, Plaintiff,
ABBOTT VASCULAR, INC. AND ABBOTT LABORATORIES, Defendants.
E. CONNOLLY, UNITED STATES DISTRICT JUDGE.
Tendyne Holdings, Inc. Securityholders' Representative
Committee on behalf of the Tendyne Holdings, Inc.
Securityholders ("Plaintiff) filed this breach of
contract action against Defendants Abbott Vascular, Inc. and
Abbott Laboratories (collectively, "Abbott"). D.I.
1. Plaintiff is a committee that represents the interests of
the shareholders of Tendyne Holdings, Inc.
("Tendyne"), a private medical device company
focused on developing minimally-invasive mitral valve
replacement therapies. Id. In 2015, Abbott acquired
Tendyne pursuant to an Agreement and Plan of Merger
("Agreement"). Id. The Agreement entitled
Plaintiff to certain "Earn-out Payments" upon
Abbott achieving one or both regulatory milestones called
"Earn-out Events" before certain deadlines.
sole cause of action alleged in its complaint,  Plaintiff asserts
that Abbott breached its obligations under the Agreement
"by either failing to use Commercially Reasonable
Efforts, by intentionally and materially interfering with the
achievement of Earn-out Event 1 on or before December 31,
2017 or June 30, 2018, or by breaching [Abbott's]
covenant of good faith and fair dealing in connection with
[Abbott's] performance under the Agreement."
Id. at ¶¶ 12-13. Plaintiff also alleges
that Abbott breached the Agreement "by failing to
provide Plaintiff with sufficient reports of the Earn-out
Devices' progress." Id. at ¶ 14.
has moved to dismiss the complaint for failure to state a
claim under Federal Rule of Civil Procedure 12(b)(6), and, in
the alternative, has moved for a more definite statement
under Federal Rule of Civil Procedure 12(e). D.I. 5.
state a claim upon which relief can be granted, a complaint
must contain "a short and plain statement of the claim
showing that the pleader is entitled to relief." FED. R.
Civ. P. 8(a)(2). Detailed factual allegations are not
required, but the complaint must set forth sufficient factual
matter, accepted as true, to "state a claim to relief
that is plausible on its face." BellAtl Corp. v.
Twombly, 550 U.S. 544, 570 (2007). A claim is facially
plausible when the factual content "allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged." Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (citation omitted).
considering a Rule 12(b)(6) motion to dismiss, the court must
accept as true all factual allegations in the complaint and
view them in the light most favorable to the plaintiff.
Umlandv. Planco Fin. Servs., Inc., 542 F.3d 59, 64
(3d Cir. 2008). The Court, however, is "not required to
credit bald assertions or legal conclusions improperly
alleged in the complaint." In re Rockefeller Ctr.
Props., Inc. Sec. Litig., 311 F.3d 198, 216 (3d Cir.
2002) (citation omitted).
state a claim for breach of contract under Delaware law,
plaintiff must allege facts sufficient to enable a defendant
to plausibly infer: (1) the existence of a contractual
obligation; (2) a breach of that obligation by the defendant;
and (3) resulting damage to the plaintiff. VLIW Tech.,
LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del.
undisputed here that Plaintiff satisfies the first
requirement to state a claim for breach of contract.
Plaintiff alleges that the Agreement required Abbott to use
"Commercially Reasonable Efforts" to achieve the
Earn-out Events and to provide Plaintiff with certain updates
regarding the Earn-out Device's progress toward
achievement of the Earn-out Events. D.I. 1 at¶9. The nub
of the parties' dispute is whether Plaintiff has
plausibly alleged that Abbott breached that contractual
argues that it has "pleaded the factual allegations that
[Abbott] did not act in a commercially reasonable manner and
failed to obtain CE Mark approval, as well as [Abbott's]
failure to provide sufficient progress reports[.]" D.I.
9 at 5 (citing D.I. 1 at ¶¶ 9-10). The complaint,
however, not only fails to address the Agreement's
definition of Commercially Reasonable Efforts, but contains
only conclusory assertions that Abbott breached the Agreement
by failing to use Commercially Reasonable Efforts.
See D.I. 1 at ¶ 13. Plaintiffs complaint merely
alleges that "Earn-out Event 1 was not achieved by
December 31, 2017 as a result of [Abbott's] failure to
use Commercially Reasonable Efforts or intentional decisions
that materially interfered with the achievement of Earn-out
Event 1." Id. at ¶ 10. This conclusory
legal assertion is not entitled to the assumption of truth.
See Iqbal, 556 U.S. at 680.
does not allege any facts from which it can be plausibly
inferred that Abbott either failed to use Commercially
Reasonable Efforts or made intentional decisions to interfere
materially with the achievement of Earn-out Event 1. As taken
from Abbott's brief in support of its motion to dismiss,
the Agreement extensively defines "[Abbott] Commercially
Reasonable Efforts" as:
[C]arrying out those obligations and tasks that comprise a
level of effort and expenditure of resources (including
appropriate allocation of resources) consistent with
commercially reasonable practices normally and typically used
by [Abbott], taken as a whole, and comparable companies to
[Abbott], taken as a whole, that are engaged in the medical
device industry, in each case, in connection with the
development (including pre-clinical studies and clinical
trials), testing, protection of intellectual property,
pursuit of regulatory approvals or clearance requirements and
manufacturing, in any case, of a product owned or controlled
by [Abbott] taken as a whole, or such other comparable
companies which are, at the time of such measurement of such
level of effort and expenditure of resources, similarly
situated (including with respect to market potential and
sales potential), at a stage of development similar to the
Earn-out Device and having comparable regulatory approval or
clearance requirements, include CE mark and device approval
requirements; provided that such efforts shall take
into account, using [Abbott's] reasonable judgment,
conditions then prevailing and reasonably expected to occur
in relation to safety and efficacy, anticipated pricing,
costs, time to develop, the nature and extent of market
exclusivity (including patent coverage of the Earn-out
Device), medical and clinical considerations, labeling,
reimbursement rates, the competitiveness of alternative
products in the marketplace, the level of applicable
intellectual property protection of the Earn-out Device and
such other competitive products, the likelihood of and
requirements for regulatory approval and other relevant
scientific, technical, legal and commercial factors;
provided, further, that such efforts shall include
the right of [Abbott], using [Abbott's] reasonable
judgment, to suspend, discontinue or decrease efforts to
achieve the relevant Earn-out Event in circumstances where
such suspension, discontinuation or decrease is consistent
with the exercise of [Abbott] Commercially Reasonable
D.I. 6 at 2 (first alteration in original) (emphasis in
original) (citing Agreement § Ll3(b)(i)).
Agreement's definition of Commercially Reasonable Efforts
expressly provides that Abbott's failure to achieve
Earn-out Event 1 by itself does not amount to a breach of the
Agreement. As stated above, the definition of Commercially
Reasonable Efforts provides that "such efforts shall
include the right of [Abbott], using [Abbott's]
reasonable judgment, to suspend, discontinue or decrease
efforts to achieve the relevant Earn-out Event...."
D.I. 6 at 2 (citing Agreement § 1. l3(b)(i)) (emphasis
added). Thus, assuming that Abbott exercises reasonable
judgment, the definition of Commercially Reasonable Efforts
affords Abbott with the discretion to discontinue its efforts
to achieve Earn-out Event 1. Plaintiff does not allege any
facts tending to show how Abbott may have failed to exercise
reasonable judgment in connection with Abbott's failure
to achieve Earn-out Event 1 or how Abbott may have acted
intentionally to interfere with the achievement of Earn-out
the definition of Commercially Reasonable Efforts requires
Abbott, in connection with achieving the Earn-out Events, to
exert effort and expend resources "consistent with
commercially reasonable practices normally and typically
used" by Abbott and other comparable companies "in
connection with the ... pursuit of regulatory approvals or
clearance requirements and manufacturing .. . of a product...
at a stage of development similar to the Earn-out Device and
having comparable regulatory approval or clearance
requirements, including CE mark and device approval
requirements[.]" Id. (citing ...