Eurofins Panlabs, Inc. v. Ricerca Biosciences, LLC, et al., C.A. No. 8431-VCN (May 30, 2014) (Noble, V.C.)

By David Bernstein and Marisa DiLemme

The decision in Eurofins Panlabs, Inc. v. Ricerca Biosciences, LLC concerns a Stock and Asset Purchase Agreement (the “SAPA”) entered into in September 2012 by plaintiff, Eurofins Panlabs, Inc. (“Eurofins”), a Delaware corporation, and defendants, Ricerca Biosciences, LLC (“Ricerca”), a Delaware limited liability company, and Ricerca Holdings, Inc., a Delaware corporation.  Ronald Ian Lennox (“Lennox”), Chairman and CEO of Ricerca, is also a defendant in the case.

Most of the opinion focuses on Eurofins’ claims against Ricerca related to specific provisions of the SAPA, whether Ricerca breached these provisions, and whether the breaches of contract were also fraudulent.  The Court dismissed many of Eurofins’ claims against Ricerca.  All claims against Lennox, aside from those based on the relationship with AstraZeneca PLC (“AZ”), were also dismissed.

Some of Eurofins’ claims focused on Ricerca’s relationship with AZ, a key customer of Ricerca.  On July 3, 2012, AZ notified a Ricerca key employee, Baumgartner,  that it had selected another company as its preferred supplier, which Baumgartner relayed to Lennox.  Eurofins alleges that no one from Ricerca notified Eurofins of the loss of the relationship.  Instead, in August 2012, Ricerca provided Eurofins with financial information that included  projections of a revenue stream which did not account for reduced revenues as a result of AZ’s finding a new preferred supplier. Eurofins also alleged that, at Lennox’s direction, no mention of AZ’s change in supplier was made during a due diligence call in August 2012, during which Eurofins inquired about any anticipated changes in the Ricerca customer base.  Lennox also instructed key Ricerca employees to keep references to AZ as a significant customer in the Confidential Information Memorandum and a related presentation for interested purchasers.  AZ sent its last project to Ricerca in August 2012.

In the SAPA, Ricerca represented that AZ was one of its top-ten revenue generating clients for the period ended July 31, 2012, and that since July 31, 2013, Ricerca had not had any customer or client terminate its relationship with Ricerca or substantially reduce the quantity of products or services it purchases from Ricerca.  Eurofins alleges that this was a fraudulent misrepresentation, along with the financial projections and the statements made during the diligence call.  The claim for fraud based on Ricerca’s representation in the SAPA that no customer had substantially reduced its business survived, but the Court dismissed the other fraud claim because AZ’s disclosure about a new supplier was made on July 3rd, and the representation in the SAPA only stated that customers had not terminated their relationship after July 31st.  Similarly, the breach of contract claim based on the decline in business from AZ survived, while the breach of contract claim based on the termination of the relationship was dismissed.

With respect to the claims against Lennox, Vice Chancellor Noble said that, despite the general principal that an officer cannot be held personally liable for a breach of contract by the corporation, Delaware law permits a corporate officer to “be held personally liable for the torts he commits.” He said Eurofins had pled sufficient facts to demonstrate  that Lennox’s fraudulent statements regarding the AZ relationship had preceded the SAPA and induced Eurofins to sign it.  Thus, the misrepresentations were independent of the contract, and Lennox was not entitled to the normal presumption of protection from liability on a corporate contract.

EurofinsvRicerca

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