Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Roche Diagnostics Corporation v. Medical automation systems

May 24, 2011

ROCHE DIAGNOSTICS CORPORATION, PLAINTIFF-APPELLANT,
v.
MEDICAL AUTOMATION SYSTEMS, INC.; GREGORYA. MENKE; AND KURT M. WASSENAAR, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:10-cv-1718-SEB-DML-Sarah Evans Barker, Judge.

The opinion of the court was delivered by: Easterbrook, Chief Judge.

ARGUED MAY 9, 2011

Before EASTERBROOK, Chief Judge, and WOOD and WILLIAMS, Circuit Judges.

Roche Diagnostics makes glucose monitors and other diabetes-related products that incorporate software written by Medical Automation Systems (MAS). Roche's contract with MAS entitles it to use the software for two years after the contract's initial term (2006 through 2010) and any extension. It also gives Roche a right of first refusal should MAS agree to sell its stock or assets to one of Roche's competitors "during the term of this Agreement." MAS notified Roche that it would not extend the contract after the original expiration date. Roche learned that investors in MAS were negotiating to sell their stock to Alere, Inc., which Roche considers to be a competitor. It told MAS in December 2010 that it would match Alere's offer, but MAS replied that, because the transaction would not close until 2011, Roche's right of first refusal did not apply.

The contract provides for arbitration of disputes about the right of first refusal but allows either party to ask a judge for equitable relief while arbitration is ongoing. Invoking the diversity jurisdiction, Roche asked for an injunction pending arbitration. Because the merits of the dispute will be resolved by the arbitrator, we do not discuss the terms of the contract or the nature of the parties' contentions beyond the few words already written. Some of these details appear in the district court's opinion. 2011 U.S. Dist. LEXIS 18117 (S.D. Ind. Feb. 23, 2011). It is enough for now that the district court concluded-and MAS does not deny-that Roche has a reasonable chance of prevailing in the arbitration.

The district court concluded that Roche will suffer irreparable injury if Alere acquires MAS. The acquisition could undermine the value of Roche's right to use the software through 2012. The court also concluded that the difficulty of undoing a sale (soon to be followed by a merger) could reduce, if not eliminate, the value of Roche's right of first refusal. At the same time, the district judge found, enjoining the sale would cause irreparable harm to MAS and Alere by prolonging the uncertainty about who is entitled to control MAS's business. Delay could reduce the value of MAS to Alere, leading it to withdraw (or reduce the price), to the detriment of MAS's stockholders. The district judge concluded that the best way to balance these competing interests would be to allow the sale to proceed, subject to a requirement that MAS allow Roche to use the software through 2012. The district court issued an injunction implementing this decision; the injunction expires as soon as the arbitrator renders a decision (or at the end of 2012, if the arbitrator still has not acted).

Roche asked us for an injunction pending appeal. We concluded that the sale can proceed if MAS and Alere respect Roche's exclusive rights, and if the parties ensure that MAS is maintained as a separate firm so that the transaction can be undone and the business transferred to Roche-with its full value intact-should the arbitrator rule in Roche's favor. The hold-separate portion of our injunction sets these conditions:

1. MAS survives the merger in its current form as an independent, though wholly or partially owned, corporate entity;

2. There are no material changes in MAS's operations;

3. There are no material changes in MAS's business plans;

4. Alere does not hire any current or former employees, officers, or directors of MAS;

5. MAS does not hire any current or former employees, officers, or directors, of Alere;

6. No current or former employees, officers, or directors of Alere serve as directors or board members of MAS;

7. No current or former employees, officers, or directors of MAS serve as directors or ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.