Watson Labs., Inc. v. Rhone-Poulenc Rorer, Inc. - 178 F. Supp. 2d 1099 (C.D. Cal. 2001)

Rule:

Under the Uniform Commercial Code § 2-615, contract performance will only be excused due to impracticability when the purportedly excusing events were unforeseen at the time the contract was executed.

Facts:

Plaintiff and defendant entered into a supply agreement, under which the defendant would supply plaintiff with a hypertension drug. The agreement also stipulated that the defendant would not compete with plaintiff in that drug market. Due to the alleged breach of the supply agreement, plaintiff brought the instant suit. Defendant contended that the failure to supply the drug was due to the shutdown of a plant, and thus, the breach qualified as a force majeure event. Plaintiff argued that defendant could not rely on the affirmative defense of the force majeure provided in the agreement. Plaintiff moved for partial summary judgment. On the other hand, defendant sought a determination that plaintiff was not entitled to "disgorgement" of profits as a remedy under Cal. Bus. & Prof. Code §§ 17200, 17203.

Issue:

1. Did the breach qualify as a force majeure event, thereby relieving defendant from any liability? 
2. Was the plaintiff entitled to "disgorgement" of profits as a remedy under Cal. Bus. & Prof. Code §§ 17200, 17203? 

Answer:

1) No. 2) No.

Conclusion:

The court found that the force majeure provision did not exclude defendants’ performance because the shutdown of a plant was entirely foreseeable and not encompassed within the force majeure clause. Furthermore, defendants could not rely on their affirmative defenses, which included unclean hands, mitigation, and waiver, to defend against the claim. Thus, defendant breached the agreement. Anent the second issue, the court granted defendants' motion concerning Cal. Bus. & Prof. Code § 17200 liability under the unfair and fraudulent prongs where plaintiff was not a member of the public or a consumer entitled to such protection. Also, the court found that plaintiff was not entitled to disgorgement of profits as a remedy, but was entitled to lost profits.