Summary
The Massachusetts Superior Court grants Alere, Inc. and Innovacon, Inc.’s motion for summary judgment in a dispute concerning contingent earnout payments arising from Alere’s acquisition of TwistDx, Inc. The court rejects claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and violations of Massachusetts General Laws chapter 93A. It concludes that the merger agreement did not require Alere to develop an RPA diagnostic instrument, that the evidence did not show violations of the agreement’s commercially reasonable efforts provisions, and that the implied-covenant and consumer-protection claims could not proceed.
Topics
Practice areas
Questions Presented
- Whether the Merger Agreement required Alere to develop an RPA diagnostic instrument using resources outside TwistDx.
- Whether Alere breached its express obligations to use commercially reasonable efforts to support TwistDx's product development, to provide TwistDx autonomy, to pursue non-IVD licensing opportunities, or to continue funding TwistDx's product development.
- Whether Alere breached the implied covenant of good faith and fair dealing by failing to use a BARDA grant to develop an RPA instrument or by failing to develop such an instrument generally.
- Whether Alere engaged in unfair or deceptive acts or practices under Massachusetts General Laws chapter 93A, section 11 by allegedly misrepresenting which products would qualify for earnout milestones or by terminating non-IVD payments in retaliation for plaintiffs' contractual claims.
Holdings
- The Merger Agreement did not require Alere to develop an RPA instrument or diagnostic device using resources outside TwistDx, and the court could not add that omitted obligation to the unambiguous contract.
- Alere was entitled to summary judgment because the Merger Agreement adopted an inward-facing commercially reasonable efforts standard, and plaintiffs offered no evidence that Alere provided less support to TwistDx than it provided to comparable products or business units.
- The autonomy provision did not grant TwistDx absolute or unfettered autonomy; Alere could impose limits consistent with the autonomy granted to similar operating units and with applicable budgets and company policies.
- Alere did not breach section 7.10(d) because it retained employees and consultants to pursue non-IVD opportunities, made commercially reasonable efforts to exploit identified opportunities, and generated licensing revenue that produced earnout payments.
- Section 7.10(a) permitted Alere to discontinue funding TwistDx's product-development efforts when, after consultation with TwistDx management, it reasonably and in good faith concluded that continued investment was no longer commercially reasonable.
- Alere did not breach the implied covenant because the covenant could not require Alere to use the BARDA grant for TwistDx or create an obligation to develop an RPA instrument that the Merger Agreement did not contain. The BARDA theory was also time-barred.
- Plaintiffs failed to present sufficient evidence of a chapter 93A violation based on alleged assurances concerning c. diff and norovirus tests. The theory failed because the asserted evidence was inadmissible, reliance would have been unreasonable under the written agreement, and the alleged misconduct did not occur primarily and substantially in Massachusetts.
- Alere was entitled to summary judgment because its contractual obligation to make non-IVD payments ended on May 8, 2021, and, independently, the alleged retaliatory conduct did not occur primarily and substantially in Massachusetts.
Key quotations
“The Court may not read into the Merger Agreement a new requirement that Alere develop an RPA instrument using resources outside of TwistDx.” (at 3)
“Alere retained the discretion to exercise its business judgment about whether continuing to invest in product development by TwistDx made commercial sense, and to terminate those efforts if continuing to fund them was not commercially reasonable.” (at 8)
“The covenant “does not supply terms that the parties were free to negotiate, but did not, nor does it ‘create rights and duties not otherwise provided’ for in the contract.”” (at 10)
Factual background
Alere acquired all outstanding shares of TwistDx, Inc., a United Kingdom company developing Recombinase Polymerase Amplification technology, and paid its former shareholders $35 million at closing. The Merger Agreement provided for additional earnout payments of up to $125 million, of which $25 million was paid. After Abbott acquired Alere in 2017, funding for TwistDx was discontinued and the United Kingdom facility was shut down in May 2018. The former securityholders alleged that Alere breached express and implied contractual obligations and violated chapter 93A by depriving them of further earnout opportunities.
Procedural history
Alere acquired TwistDx in 2010 under a Merger Agreement providing for contingent earnout payments and specified obligations concerning product development, autonomy, and non-IVD licensing opportunities. After Alere discontinued funding TwistDx and shut down its United Kingdom operations in 2018, the former securityholders sued Alere and Innovacon. The court allowed defendants' motion for summary judgment on all three remaining claims and ordered that plaintiffs take nothing.