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Fortis Advisors LLC v. Allergan W.C. Holding Inc.

Court of Chancery of Delaware

July 9, 2019, Submitted; October 30, 2019, Decided

C.A. No. 2019-0159-MTZ

Opinion

ZURN, Vice Chancellor.

The parties to a merger dispute the seller's entitlement to post-closing milestone payment consideration. For the seller to earn the milestone payment, the new company had to achieve a specifically defined enhanced treatment authorization from the Federal Drug Administration. After the Federal Drug Administration gave its authorization, the company declined to pay the seller the milestone payment.

The seller stockholders' representative asserts the buyer breached the merger agreement by refusing to pay the milestone payment and by failing to exercise commercially reasonable efforts in pursuit of the authorization. The buyer moved to dismiss, contending the enhanced treatment authorization did not trigger the milestone [*2]  payment, and that the buyer failed to allege sufficient facts in support of its commercially reasonable efforts claim. This decision concludes that the seller adequately alleged a breach of contract claim based on the plain meaning of the contract and the authorization, and that the seller alleged sufficient facts to support its commercially reasonable efforts claim. Accordingly, I deny the buyer's motion to dismiss.

I. BACKGROUND

I draw the facts from the seller's Verified First Amended Complaint (the "Amended Complaint") and the documents incorporated by reference therein.1 I must accept as true the Amended Complaint's well-pled factual allegations and draw all reasonable inferences from those allegations in plaintiff's favor.2

A. The Merger Agreement

In July 2015, an affiliate of defendant Allergan W.C. Holding Inc. ("Allergan") acquired Oculeve, Inc. ("Oculeve"). At issue in this case is Oculeve's primary product in development at the time: a medical device for insertion in the nostrils that causes a person's eyes to tear by way of a small electric charge (the "Product").

The parties executed an Agreement and Plan of Merger (the "Merger Agreement") on July 5, 2015, and the merger [*3]  closed on August 10. The Merger Agreement designated Fortis Advisors LLC ("Fortis") as the seller stockholders' representative.

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2019 Del. Ch. LEXIS 1337 *; 2019 WL 5588876

FORTIS ADVISORS LLC, in its capacity as the Shareholders' Representative for the former stockholders of Oculeve, Inc., Plaintiff, v. ALLERGAN W.C. HOLDING INC., Defendant.

Notice: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

Subsequent History: Motion denied by Fortis Advisors, LLC v. Allergan W.C. Holding, Inc., 2020 Del. Ch. LEXIS 181 (Del. Ch., May 14, 2020)

CORE TERMS

Milestone, symptoms, Enhanced, dry, Labeling, Merger, disease, patient, tear, notice, temporary, seller, neurostimulation, adult, Novo, causation, buyer

Civil Procedure, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Evidence, Judicial Notice, Adjudicative Facts, Facts Generally Known, Verifiable Facts, Public Records, Business & Corporate Compliance, Breach, Breach of Contract Actions, Elements of Contract Claims, Contracts Law, Contract Interpretation, Ambiguities & Contra Proferentem, Medical Treatment, Healthcare Law, Medical Treatment