In the News Law360

Eye Med Distributor's $100M Suit Barred By Deal, Akorn Says

Generic-drug maker Akorn Inc. on Friday asked a New York federal court to dismiss most claims from Fera Pharmaceuticals LLC's $100 million suit accusing it of trade secrets theft, breach of a supply agreement and unfair competition, arguing the allegations were invalid or barred by the agreement.

According to Akorn's motion to dismiss, the distributor's accusations are essentially revenge for Akorn's termination of the supply agreement after Fera failed to make required contractual minimum purchases, and are not based on any rights within the contract.

"In 2012, when Fera failed to hold up its own end of the bargain ... Akorn exercised its right to terminate the contract," Akorn said. "Fera responded by filing this lawsuit, in which it seeks to exercise purported rights for which it never bargained and to assert claims that the contract expressly forbids."

Fera's suit claims Akorn failed to fully fill purchase orders for seven ophthalmic drugs and misused Fera's proprietary information to make its own eye ointment.

Akorn says that while it told Fera in September 2009 that it was unable to meet some of its manufacturing requests, due to capacity restraints at its manufacturing plant, Fera was able to get its drugs made elsewhere and didn't raise any complaints at the time.

It was only when Akorn terminated the supply deal in May 2012, after Fera failed to purchase the minimum annual amounts required by the contract, that Fera took issue with Akorn's alleged contract breaches, the motion claims.

The terms of the deal, however, had made clear that capacity limitations would limit how much Akorn could make for Fera, according to Akorn. This means Fera can't reasonably claim Akorn or its employees had fraudulently attempted to induce it to sign the contract by claiming it could meet all of Fera's manufacturing needs through 2010, according to Akorn.

Fera's fraud claim and its unfair competition claim were also barred by New York law, as echoes of its breach of contracts claim, Akorn said.

Several of Fera's other claims were also barred by the terms of the supply contract, Akorn claims. The supply agreement superseded a nondisclosure agreement under which Fera had brought several of its claims. The companies had signed that pact while discussing entry into the manufacturing deal.

And a clause limiting Akorn's liability for any claims "in any way related to" the agreement meant Fera couldn't look to recoup any allegedly lost profits or market share either, according to Akorn.

Further, the supply contract placed a two-year limitation on when either party could bring legal claims over any alleged breaches, meaning that any claims after September 2010 — two years before Fera sued Akorn — are time-barred, Akorn claims.

Fera originally sued Akorn and several of its executives in New York state court, alleging Akorn had failed to abide by the terms of a contract to supply Fera with anti-infective eye medicines, including bacitracin and erythromycin eye ointments, then turned around and made its own erythromycin in competition with Fera, costing it at least $100 million in lost business and market share. The case was removed to federal court in October.

Counsel for Fera did not immediately respond to a request for comment Monday.

Fera is represented by Paul J. Napoli and Adam J. Gana of Napoli Bern Ripka Shkolnik LLP.

Akorn and its executives are represented by Jay P. Lefkowitz, John P. Del Monaco, Douglas J. Kurtenbach and Nader R. Boulos of Kirkland & Ellis LLP.

The case is Fera Pharmaceuticals LLC v. Akorn Inc. et al., case number 1:12-cv-07694, in the U.S. District Court for the Southern District of New York.