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Media Alerts - Mylan Inc v. SmithKline Beecham Corp - Third Circuit
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August 1, 2013
  Mylan Inc v. SmithKline Beecham Corp - Third Circuit
Headline: Summary Judgment Inappropriate Where District Court Refuses to Consider Extrinsic Evidence to Aid Contract Interpretation

Area of Law: Summary Judgment; Contract Law

Issue(s) Presented: Whether summary judgment was appropriate where District Court refused to consider extrinsic evidence in support of alternative contractual interpretation?

Brief Summary: The Third Circuit reversed the United States District Court for the District of New Jersey's decision granting summary judgment in favor of two pharmaceutical companies, GSK and Apotex. Appellant Mylan brought contract claims against both GSK and Apotex, claiming that Mylan had exclusive rights to market and sell the generic drug paroxetine. GSK entered into an agreement with Mylan, offering Mylan a two-year exclusive right to market and sell generic paroxetine. After the two year exclusivity period ended, GSK entered into an agreement with Apotex, a Mylan competitor, which allowed Apotex to also market and sell paroxetine. Mylan claimed that even though the two-year exclusivity period had ended, GSK was only permitted to market and sell paroxetine to downstream customers such as hospitals, retailers, and pharmacy chains. The District Court found that Mylan's contract with GSK was unambiguous, and that GSK could enter into agreements with other companies such as Apotex. Therefore, the District Court did not consider Mylan's alternative interpretation of the contract, and the extrinsic evidence offered in support of Mylan's interpretation. The Third Circuit reversed, holding that under New Jersey law, the District Court should have considered Mylan's interpretation and supporting evidence even if the contract was unambiguous on its face. The Third Circuit affirmed the District Court's grant of summary judgment against Mylan on its other claims against GSK and Apotex.

Extended Summary: This case arose after appellee GSK, which holds patent and FDA rights to market and sell the generic drug paroxetine under the brand name Paxil CR, granted appellant Mylan Pharmaceuticals certain rights to produce, market, and sell generic paroxetine. After GSK agreed to begin supplying Appellee Apotex Corp. with GSK-produced generic paroxetine for marketing and sale, Mylan filed suit against GSK and Apotex. Mylan claimed that GSK's licensing agreement with Apotex violated Mylan's agreement with GSK, which allegedly did not permit GSK to provide generic paroxetine to another competitor such as Apotex. The District Court granted summary judgment against Mylan, holding that the GSK-Mylan agreement did not limit to whom GSK could market and sell generic paroxetine and therefore GSK did not breach its agreement with Mylan. The Third Circuit reversed and remanded the District Court's grant of summary judgment on Mylan's breach-of-contract claim, but affirmed summary judgment on all other claims. Mylan originally brought suit against GSK in the District Court for breach of contract and the implied covenant of good faith and fair dealing, and against Apotex for tortious interference with and inducement to breach a contract. Mylan pointed to its amended License Agreement with GSK, which gave Mylan a two-year exclusivity period for generic paroxetine. Mylan claimed that even after the two-year exclusivity period, GSK was only permitted to market and sell paroxetine to downstream customers, such as hospitals, retailers, and pharmacy chains. Because Apotex is an intermediary drug company, it was in competition with Mylan. The District Court granted summary judgment in favor of GSK and Apotex, holding that the agreement was unambiguous and clearly permitted GSK to market and sell paroxetine to whomever it wished after Mylan's two-year exclusivity period ended. Because the District Court found the terms of the agreement unambiguous, the court declined to consider any intent evidence, as well as industry and custom evidence, offered by Mylan. In the absence of proof of bad motive, the District Court also held that GSK did not violate the implied covenant of good faith and fair dealing. Additionally, because Mylan had no protectable contract right, its claims against Apotex necessarily failed. On appeal to the Third Circuit, Mylan claimed that there was a reasonable alternative interpretation of the agreement: that supplying a third-party generic competitor, such as Apotex, was impermissible. The Third Circuit agreed, holding that the District Court erred in refusing to consider the evidence offered in support of Mylan's interpretation. The Court reasoned that the District Court should have taken into account the alternative interpretation and supporting evidence suggested by Mylan in order to determine whether the extrinsic evidence demonstrated the existence of latent ambiguity. The Third Circuit pointed to New Jersey law, which governs the agreement, and found that New Jersey law requires that extrinsic evidence be considered in aid of contract interpretation. Because the District Court was not free to reject extrinsic evidence, even if the court found the agreement free from ambiguity on its face, summary judgment was not appropriate. However, the Third Circuit affirmed the District Court's grant of summary judgment on Mylan's breach of the implied covenant of good faith and fair dealing, holding that although GSK's agreement with Apotex frustrated Mylan's expected profits, Mylan did not produce any evidence that GSK entered into the Apotex agreement with bad faith or improper motive. Similarly, summary judgment was appropriate on Mylan's tortious interference claim against Apotex, because under New Jersey law, a plaintiff must demonstrate that the interference with a contractual relationship is knowing, intentional, and wrongful, and the record did not suggest that Apotex had any knowledge of Mylan's asserted contractual rights.

The full opinion can be found at http://www2.ca3.uscourts.gov/opinarch/121539p.pdf

Panel: Circuit Judges Scirica, Ambro, and Fuentes

Argument Date: 1/08/2013

Argument Location: Philadelphia

Date of Issued Opinion: 7/22/2013

Docket Number: No. 12-1539

Decided: Reversed; Affirmed

Case Alert Author: Larissa Staszkiw

Counsel: Gary D. Adamson, Esq., Michael E. Johnson, Esq., Counsel for Appellants; William H. Burgess, Esq., F. Christopher Mizzo, Esq., Michael A. Pearson, Esq., Thomas A. Cunniff, Esq., Eric I. Abraham, Esq., and Christina L. Saveriano, Esq., Counsel for Appellees.

Author of Opinion: Judge Ambro

Circuit: 3rd Circuit

Case Alert Circuit Supervisor: Professor Mary E. Levy

    Posted By: Susan DeJarnatt @ 08/01/2013 07:57 AM     3rd Circuit  

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