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MeriX Pharmaceutical Corp. v. EMS Acquisition Corp.

February 4, 2010

MERIX PHARMACEUTICAL CORPORATION, PLAINTIFF,
v.
EMS ACQUISITION CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Honorable David H. Coar

MEMORANDUM OPINION AND ORDER

This diversity suit arises from EMS's allegedly botched manufacture of placebo for use in a clinical trial of Merix's over-the-counter cold-sore remedy Releev. Merix has filed a state-law suit against EMS for breach of contract, breach of the parties' confidentiality agreement, and negligence. EMS has moved to dismiss the entire case for lack of personal jurisdiction and for improper venue, see Fed. R. Civ. P. 12(b)(2), 12(b)(3), and to dismiss Count I of the second amended complaint for failure to state a claim, see Fed. R. Civ. P. 12(b)(6). Alternatively, EMS has moved to transfer this litigation to the Eastern District of Pennsylvania. See 28 U.S.C. § 1404. For the following reasons, EMS's motion is DENIED in its entirety.*fn1

FACTS

The relevant factual allegations in the complaint, which the court must accept as true for present purposes, are as follows: Merix, a pharmaceutical company located and incorporated in Illinois, markets and sells a product called Releev, an over-the-counter topical remedy for cold sores. In 2003, Merix approached EMS, a drug and cosmetic manufacturer located and incorporated in Pennsylvania, about the prospect of producing Releev at EMS's facility in Montgomery County, Pennsylvania. The two companies reached a deal and production of Releev commenced.

On May 29, 2003, Merix and EMS signed a confidential disclosure agreement ("CDA"), which provides that EMS shall not make any unauthorized use or disclosure of Merix's formula for Releev or of any other "confidential" information. The CDA provides, as relevant here:

The detailed business or other information of Merix and/or Squires [the founder of Merix] to which [EMS] may become privy during the Term of this Agreement... constitutes confidential and proprietary information, the disclosure, copying or distribution of which could result in competitive harm to Merix and Squires. [EMS] agrees to maintain the Information in the strictest confidence and agrees not to disclose, modify, duplicate, or distribute the Information, whether orally or in writing, directly or indirectly, in whole or in part, except to those of [EMS's] employees, agents, and subcontractors with a need to know the Information...

Merix or Squires may give [EMS] the right to use the Information and/or Intellectual Property solely for the provision of services to, or for the benefit of, Merix and/or Squires pursuant to or in conjunction with this Agreement. [EMS] shall not use or disclose, nor allow any of its employees or agents or subcontractors to use or disclose, any of such Information and/or Intellectual Property without first making sure that appropriate documentation of such permitted use or disclosure under this Agreement has been executed.

In July 2005, Merix authorized EMS to manufacture 200 vials of Releev and 200 vials of an inert placebo for use in a double-blind clinical trial to be conducted by the PRACS Institute, an independent lab in North Dakota. EMS knew that the purpose of the clinical trial was to procure evidence that would be beneficial to Merix in pending litigation involving Releev. Merix told EMS "that its authorization to use Merix's confidential information was contingent upon EMS excluding from the placebo the listed active ingredient benzalkonium chloride ("BKC") and further ensuring that the placebo was inert." In October 2005, EMS produced, bottled, and shipped the placebo. Unbeknownst to Merix, as the protocol for the clinical trial required Merix to remain blinded throughout, the placebo was not inert-it contained BKC. As a result, Merix was forced to run a second clinical trial using product it procured from a different manufacturer, incurring substantial further expenses in its ongoing litigation in addition to the cost of the second clinical trial itself.

Merix eventually filed suit in this court, alleging breach of contract and negligence. In response to Merix's original and first amended complaints, EMS moved to dismiss for lack of personal jurisdiction and for improper venue, or in the alternative, to transfer venue to the Eastern District of Pennsylvania. Along with its memoranda supporting these motions, EMS submitted exhibits that revealed the still-confidential product formula and step-by-step manufacturing instructions for Releev. The first of these documents was submitted through the court's CM/ECF docketing system on November 9, 2009; the second was submitted on November 13, 2009. On November 24, 2009, Judge Keys directed the Clerk of Court to remove the documents from the public record and to file them under seal. Judge Keys then granted Merix leave to file its second amended complaint, in which Merix added a claim for breach of the CDA (Count I).

The CDA contains a forum-selection clause, which provides that "[t]his Agreement... shall be governed by the laws (except choice of laws provisions) of the State of Illinois, U.S.A., to the courts of which, state and Federal, the parties hereto hereby submit to personal jurisdiction and venue for purposes of enforcing the terms hereof."

The parties supplemented the CDA in a series of emails, and in 2005, they entered into a global operating agreement, which further memorialized their prior years of operating practices.

ANALYSIS

As a preliminary matter, EMS's motion-as well as the substance of its accompanying arguments-invites the court to decide the issues presented in a patently impermissible sequence. EMS contends that Count I of the second amended complaint is a "transparent attempt to create personal jurisdiction where none exists;" specifically, Merix "fabricate[d] a claim" for breach of the CDA "in an effort to rely on the forum selection clause contained in the CDA." Thus, EMS first seeksdismissal of Count I for failure to state a claim-or otherwise to have the court ignore the CDA's forum-selection clause in its personal-jurisdiction and forum analyses.

This court does not speculate about a plaintiff's motives for amending its complaint, and those motives are, in any event, immaterial to the viability of a plaintiff's claim. Merix's claim for breach of the CDA will stand or fall on its own, and the court will take up that question at the appropriate juncture. But the court may not reach the merits of a claim until the jurisdictional matters have been settled. See In re LimitNone, LLC, 551 F.3d 572, 576 (7th Cir. 2008). The court therefore declines EMS's ...


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