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Shionogi Ireland, Ltd. (F/K/A Sciele Pharma Ireland, Ltd v. United Research Laboratories

August 16, 2011


The opinion of the court was delivered by: Buckwalter, S. J.


Plaintiff Shionogi Ireland, Ltd. ("Plaintiff") has filed the present Motion to Dismiss Defendant United Research Laboratories, Inc.'s ("Defendant" or "URL") Counterclaim. For the following reasons, the Motion is granted in part and denied in part.


According to the factual allegations set forth in Defendant's Counterclaim, Plaintiff markets and distributes an FDA-approved drug called Sular. (Countercl. ¶ 5.) On August 17, 2009, Plaintiff and Defendant entered into an agreement ("the Agreement") pursuant to which Defendant was granted an exclusive sublicense to market and sell a generic alternative to Sular ("the Product"). (Id. ¶ 6.)*fn1 Both Sular and the Product are forms of Nisoldipine, a drug used to treat high blood pressure. (Id. ¶¶ 5, 22.) In exchange for distributing the Product, Defendant would receive a 15% commission on the net revenue of the sales. (Id. ¶¶ 7-9.) Defendant paid Plaintiff a nominal price, known as the "Transfer Price," for a supply of the Product. (Id. ¶ 10.)

According to Defendant, in the event that the Transfer Price exceeded the Net Sell Price of the Product,*fn2 the Transfer Price would be reduced to an amount equal to the Net Sell Price less 20%. (Id. ¶¶ 10-13.) This was referred to in the Agreement as "Price Protection." (Id. ¶ 11.)

After the parties entered into the Agreement, Defendant alleges that Plaintiff engaged in a course of conduct that prevented it from realizing the benefit of its bargain. First, Defendant contends that even though the Agreement commenced in August of 2009, Plaintiff directed Defendant to delay the launch of the Product until June of 2010. (Id. ¶ 20.) Second, during the time period between the signing of the Agreement and the launch of the Product, Plaintiff raised the price of Sular three times, which compelled consumers to seek alternatives to Nisoldipine. (Id. ¶¶ 21-23.) Third, after Plaintiff launched the Product, it continued to raise the price of Sular while directing Defendant to increase the volume of its orders for the Product. (Id. ¶¶ 24-25.) Fourth, Plaintiff supplied Sular to certain customers at prices lower than Defendant was charging for the Product. (Id. ¶¶ 26-29.) Finally, on March 24, 2011, Defendant exercised its contractual right to terminate the Agreement, and on April 5, 2011 notified Plaintiff that it had a substantial amount of the Product that it was unable to sell. (Id. ¶¶ 34-35.) Plaintiff refused to take back the Product, and Defendant has been forced to sell it at prices well below the Transfer Price. (Id. ¶¶ 36-39.)

On April 28, 2011, Plaintiff filed a Complaint in this Court, alleging that Defendant breached the Agreement when it failed to pay amounts due and owing, to use reasonable commercial efforts to market, distribute, and sell the Product, and to market and sell the Product in a way that maximized revenue. (Compl. ¶¶ 10-12, 22.) Defendant filed its Answer and Counterclaim on May 18, 2011. The Counterclaim includes three counts: (i) breach of contract; (ii) breach of the implied covenant of good faith and fair dealing; and (iii) declaratory relief, which asks the Court to interpret certain terms of the Agreement. (Countercl. ¶¶ 40-55.) Plaintiff filed the present Motion to Dismiss Defendant's Counterclaim on June 13, 2011, Defendant filed its Response in Opposition on July 21, 2011, and Plaintiff filed a Reply Brief on August 4, 2011.


Pursuant to Federal Rule of Civil Procedure 12(b)(6), a defendant bears the burden of demonstrating that the plaintiff has not stated a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6); see also Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), the United States Supreme Court recognized that "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555. It emphasized that it would not require a "heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face." Id. at 570.

In the subsequent case of Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), the Supreme Court enunciated two fundamental principles applicable to a court's review of a motion to dismiss for failure to state a claim. First, it noted that "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.

at 1949. Thus, although "[Federal] Rule [of Civil Procedure] 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era . . . it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Id. at 1950. Second, the Supreme Court emphasized that "only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. "Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id.

Notwithstanding the foregoing, nothing in Twombly or Iqbal has altered some of the fundamental underpinnings of the Rule 12(b)(6) standard of review. Arner v. PGT Trucking, Inc., No. CIV.A.09-0565, 2010 WL 1052953, at *2 (W.D. Pa. Mar. 22, 2010); Spence v. Brownsville Area Sch. Dist., No. CIV.A.08-0626, 2008 WL 2779079, at *2 (W.D. Pa. Jul. 15, 2008). Federal Rule of Civil Procedure 8 requires only a short and plain statement of the claim showing that the pleader is entitled to relief and need not contain detailed factual allegations. FED. R. CIV. P. 8; Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008). Further, the court must "accept all factual allegations in the complaint as true and view them in the light most favorable to the plaintiff." Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006). Finally, the court must "determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Pinkerton v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002).


A. Breach of ...

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