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DELAVAU, L.L.C. v. J.M. Huber Corp.

United States District Court, E.D. Pennsylvania

December 21, 2017

DELAVAU, LLC, Plaintiff,
v.
J.M. HUBER CORPORATION, Defendant.

          MEMORANDUM

          DUBOIS J.

         I. INTRODUCTION

         This action arises out of J.M. Huber Corporation's alleged breach of a Supply Agreement entered into as a part of a Settlement Agreement to resolve a patent dispute. Presently before the Court is Defendant's Motion to Dismiss and to Stay. For the reasons that follow, the Motion is granted in part and denied in part.

         II. BACKGROUND

         The pertinent facts as set forth in plaintiff's Complaint are summarized as follows. Defendant processes and supplies calcium carbonate powder for use in pharmaceutical manufacturing. Compl. ¶ 7. Plaintiff uses calcium carbonate powder to manufacture calcium-based antacid tablets, vitamins and other supplements. Compl. ¶ 6. On August 27, 2012, plaintiff sued defendant for patent infringement in the United States District Court for the District of New Jersey, alleging that defendant infringed plaintiff's patent for a process used to prepare a high density calcium carbonate granulation. Compl. ¶ 8. Following settlement negotiations, the parties entered into a Settlement Agreement on May 15, 2014 (“2014 Settlement Agreement”). Compl. ¶ 10. As part of the 2014 Settlement Agreement, the parties entered into a Supply Agreement that was executed simultaneously with the Settlement Agreement and has a term from May 15, 2014 through December 31, 2024. Compl. ¶ ¶ 12, 13.

         Under the terms of the Supply Agreement, defendant agreed to sell plaintiff “a minimum of ninety percent (90%) of Buyer's [plaintiff's] requirements in the U.S. for qualified grades of calcium carbonate powder . . . .” Supply Agreement, Compl. Ex. C, ¶ 2.1. Subsequent to the signing of the Supply Agreement, plaintiff worked with defendant to qualify grades of calcium carbonate powder to satisfy plaintiff's requirements under the agreement. Compl. ¶ 19. Plaintiff continued to provide defendant with information regarding its manufacturing processes and calcium carbonate needs, including information with respect to the median particle size of the calcium carbonate powder and the particle size distribution parameters. Compl. ¶ 24. Pursuant to the Supply Agreement and the qualification process, defendant provided calcium carbonate powder to plaintiff with a particle size distribution that was consistent with plaintiff's manufacturing process for a period of approximately two years. Compl. ¶ 38.

         In September 2015, following a change in management of defendant, defendant advised plaintiff of its belief that the Supply Agreement was “a terrible agreement” because of the low price that plaintiff was paying for the calcium carbonate. Compl. ¶ 29. Thereafter, defendant allegedly failed to comply with the terms of the Settlement Agreement by limiting the amount of calcium carbonate provided to plaintiff. Compl. ¶ 34. To resolve the alleged breach, the parties entered into a Settlement Agreement on August 3, 2016 (“2016 Settlement Agreement”), whereby defendant paid plaintiff $400, 000 in damages resulting from that breach. Compl. ¶ 35.

         According to plaintiff, shortly after defendant paid the $400, 000 settlement pursuant to the 2016 Settlement Agreement, defendant began providing plaintiff with a calcium carbonate product that was “coarse and had a broader particle size distribution” which prevented plaintiff from using that product in its manufacturing processes. Compl. ¶ 36. The calcium carbonate product at issue, HuberCal 150D, deviated substantially from the HuberCal 150D that defendant provided to plaintiff prior to August 2016. Id. Despite repeated attempts to work with defendant to improve the HuberCal 150D, defendant refused to meet with plaintiff or make improvements to the product. Compl. ¶¶ 50-55.

         Plaintiff filed the instant suit on September 7, 2017, alleging breach of contract and two counts of breach of the implied covenant of good faith and fair dealing, with respect to both the Supply Agreement and the 2014 Settlement Agreement. Presently before the Court is Defendant's Motion to Dismiss and Stay. For the reasons that follow, Defendant's Motion to Dismiss and Stay is granted in part and denied in part.

         III. LEGAL STANDARD

         Rule 12(b)(6) of the Federal Rules of Civil Procedure permits a party to respond to a pleading by filing a motion to dismiss for “failure to state a claim upon which relief can be granted.” To survive a motion to dismiss, a plaintiff must allege facts that “‘raise a right to relief above the speculative level.'” Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A complaint must contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). A district court first identifies those factual allegations that constitute nothing more than “legal conclusions” or “naked assertions.” Twombly, 550 U.S. at 555, 557. Such allegations are “not entitled to the assumption of truth” and must be disregarded. Iqbal, 556 U.S. at 679. The court then assesses “the ‘nub' of the plaintiff['s] complaint-the well-pleaded, nonconclusory factual allegation[s]”-to determine whether it states a plausible claim for relief. Id. Importantly, the complaint's factual allegations “enjoy a highly favorable standard of review at the motion-to-dismiss stage.” Connelly v. Lane Constr. Corp., 809 F.3d 780, 790 (3d Cir. 2016). Thus, “a complaint may not be dismissed merely because it appears unlikely that [a] plaintiff can prove those facts or will ultimately prevail on the merits.” Id. 790-91 (quoting Phillips v. Cty. Of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008)).

         IV. DISCUSSION

         When ruling on a motion to dismiss, a court may consider the allegations in the complaint, exhibits attached to the complaint and matters of public record. Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3rd Cir. 1993). Plaintiff attached the 2014 Settlement Agreement and the Supply Agreement to the complaint. Accordingly, the Court considers those documents.

         The Court addresses plaintiff's claims in the order addressed in the parties briefing, beginning with Count ...


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