E-Alert Case Updates

Maryland District Court Grants in Part and Denies in Part Motion to Dismiss or, in The Alternative, For More Definite Statement Under Fed. R. Civ. P. 12(b)(6) and 12(e)

Dynport Vaccine Co., LLC v. Lonza Biologics, Inc.
United States District Court for the District of Maryland, CIVIL NO. JKB-14-2921 (D. Md. May 1, 2015)
by Jhanelle A. Graham, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.mdd.uscourts.gov/Opinions/Opinions/m&o%20grant,%20deny%20MTD,%20more%20definite%20statement%20FOR%20WEBSITE.pdf

In Dynport Vaccine Co., LLC v. Lonza Biologics, Inc., Plaintiff, DynPort Vaccine Company LLC (“DynPort”), sued Defendant, Lonza Biologics, Inc. (“Lonza”), in a three (3)-count complaint, alleging breach of contract, negligence, and unjust enrichment. The United States District Court for the District of Maryland was asked to rule on Lonza’s motion to dismiss or, in the alternative, for more definite statement under Federal Rule of Civil Procedure 12(b)(6) and 12(e). Treating Lonza’s motion as a motion to dismiss, the Court granted the motion in part and denied it in part. Alternatively, treating the motion as a motion for more definite statement, the district court granted the motion as to Count I—i.e., breach of contract.

DynPort alleged that it had a contract with the United States government to develop a vaccine against botulinum neurotoxin for the U.S. military. Further, DynPort alleged that it, in turn, contracted with Lonza to manufacture the vaccine for DynPort. According to DynPort, it entered into a basic ordering agreement (“BOA”) in 2002 with Lonza, wherein Lonza “agreed to provide certain services, pursuant to task orders, in the development of certain vaccine products.” DynPort issued various task orders (“TOs”) to Lonza, including three (3) mentioned specifically in the complaint. Under these three (3) TOs, DynPort paid Lonza $18.9 million for work to be performed. In early February 2013, however, DynPort learned that Lonza’s work on the TOs had to be delayed because Lonza’s Hopkinton, Massachusetts, facility was required by the Food & Drug Administration (“FDA”) to implement certain corrective actions to address the FDA’s criticisms of Lonza’s manufacturing practices.

On July 25, 2013, a press release from Lonza announced it was moving its Hopkinton operations to a facility in Visp, Switzerland. The same day, DynPort advised Lonza, via letter, of DynPort’s concern as to the impact of these events on Lonza’s ability to comply with its production requirements under the pending task orders, and requested that Lonza provide a cure plan to ensure that the schedule would be maintained and that the outstanding task orders would be completed timely. Concurrently, DynPort warned Lonza that its failure to comply might result in DynPort’s termination of the BOA for default. Lonza indicated that its decision about Hopkinton “would not further impact [DynPort], and that Lonza was willing to transfer the ongoing work to its facility in Visp, Switzerland, at cost to [DynPort]. Lonza did not provide a cure plan.” Three (3) days later, DynPort wrote Lonza, pointing out the deficiency in Lonza’s response and directing Lonza to commence production at the Lonza Hopkinton facility no later than September 23, 2013 under the terms of the subcontract or Lonza would be considered to be in breach of its subcontract. Further, in a letter dated August 12, 2013, DynPort demanded Lonza provide no later than August 19, 2013, its written confirmation of Lonza’s concurrence with DynPort’s requested start date of September 23, 2013, at the Hopkinton facility. In an August 19, 2013, letter, DynPort warned Lonza that its failure to comply with this direction from DynPort would be considered a breach of the subcontract, that DynPort would file a claim for damages against Lonza, and that DynPort would hold Lonza liable for all technology transfer costs to another manufacturing facility. Not receiving a response from Lonza within the allotted time, DynPort notified Lonza that it was in breach of contract and that, under the terms of the BOA and the Federal Acquisition Regulations, DynPort would proceed with termination efforts on all open Task Orders.

In a letter dated September 5, 2013, Lonza acknowledged DynPort’s termination of the contract and pledged to cooperate in the transfer of technology and intellectual property to another manufacturer. This pledge was broken when Lonza thereafter refused to transfer the technology and intellectual property to DynPort until they had reached a final resolution of the issues of liability and damages. After DynPort filed suit for injunctive relief on the issue of transfer of technology and intellectual property, DynPort VaccineCo., Inc. v. Lonza Biologics, Inc., Civ. No. JKB-13-3291 (D. Md.), the parties resolved that issue and DynPort voluntarily dismissed its suit without prejudice. DynPort alleged it has incurred significant costs because of Lonza’s refusal to perform and its breach of the agreement, including “retention of a new manufacturer, transfer of the production to that new manufacturer, manufacturing of new conformance lots for the Phase 3 clinical trial, and implementation costs incurred for the Phase 3 clinical trial.” Additionally, DynPort alleged that as a consequence of Lonza’s failure to perform, major elements of the vaccine development process had t be redone, and all the work that was performed by Lonza after the Phase 2 campaign had to be redone by a new manufacturer . . . .”

First, the district court stated that 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 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Facial plausibility exists “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. Additionally, the court articulated that an inference of a mere possibility of misconduct is not sufficient to support a plausible claim. Id. at 679.

Second, the court explained that under Rule 12(e), “[a] party may move for a more definite statement of a pleading to which a responsive pleading is allowed but which is so vague or ambiguous that the party cannot reasonably prepare a response.” Additionally, “The motion must . . . point out the defects complained of and the details desired.” Noting the interplay between the fundamental pleading requirements of Rule 8(a) and the permissibility of a motion for more definite statement under Rule 12(e), the district court cited to the Fourth Circuit’s determination that “when the complaint conforms to Rule 8(a) and it is neither so vague nor so ambiguous that the defendant cannot reasonably be required to answer, the district court should deny a motion for a more definite statement.” Hodgson v. Va. Baptist Hosp., 482 F.2d 821, 824 (4th Cir. 1973).

With respect to breach of contract, the court stated that the meager case law available regarding the legal enforceability of a BOA firmly concludes that such an agreement is not an enforceable contract, despite its use of terms typically used in the language of contracts. In Modern Sys. Tech. Corp. v. United States, 979 F.2d 200(Fed. Cir. 1992), the Court of Appeals for the Federal Circuit determined that the agreement in question there, which it likened to a BOA, was merely the framework for future contracts; thus,“[c]ontractual obligations will arise only after an order is placed.” Id. at 203-04. Nonetheless, since both parties agree that the TOs were enforceable contracts that governed their relationship, and since DynPort clarified that TOs 24, 32, and 29 were the only TOs at issue, the court held that Count I was properly redefined as claiming breach of contract as to those three TOs, and the motion for more definite statement was granted as to Count I.

With respect to the negligence claim, DynPort alleged that Lonza, by entering into the BOA, undertook a duty owed to DynPort, breached its duty, and proximately caused DynPort to suffer damages. According to the court, however, this bare-bones form of pleading was insufficient under the governing Twombly-Iqbal standard because it merely recited the elements of a cause of action for negligence. See Twombly, 550 U.S. at 555 (“a formulaic recitation of the elements of a cause ofaction will not do”). The court determined that the forty-three (43) paragraphs incorporated by reference into the negligence count were cast in the language of a contract claim and did not allow an inference of a separate duty of care arising either from the contract or from circumstances external to the contract. Moreover, the court held that Maryland law does not support the invocation of tort law under these circumstances. Because DynPort’s complaint did not allege factual content from which the court could infer a tort duty of care or a breach of anything other than contractual duties, the court held that Count II—founded upon negligence—failed to state a claim for relief.

Finally, the court addressed the unjust enrichment claim. According to the court, unjust enrichment is a quasi-contractual claim that provides a remedy to a plaintiff when no contract exists between plaintiff and defendant. County Comm’rs, Caroline Cnty. v. J. Roland Dashiell & Sons, Inc., 747 A.2d 600, 611 (Md. 2000). But a claim of “unjust enrichment cannot be asserted when an express contract defining the rights and remedies of the parties exists.” Id. at 610. Because DynPort alleged—and Lonza conceded—that an express contract existed between it and DynPort (in the form of the three (3) TOs), and because no dispute as to the terms of the contract arose, the court held that the unjust enrichment claim failed to state a claim for relief and must be dismissed.

For these reasons, the court granted DynPort leave to amend Count I, but Counts II and III were dismissed by separate order for failure to state a claim for relief.