Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D. Mass.: Amendment to third party claim would not be futile as a matter of law, (Jul 10, 2013)

By Jody Coultas, J.D.

ChemWerth, Inc. was granted leave to amend a third-party claim against Waldman Biomedical Consultancy, Inc. to include a Massachusetts Consumer Protection Act (CPA) claim by the federal district court in Boston (Bryan Corp. v. ChemWerth, Inc., July 8, 2013, Dein, J.).

Bryan Corporation purchased Tobramycin Sulfate (TS), a pharmaceutical ingredient, from ChemWerth in order to develop new products and uses for TS. ChemWerth allegedly represented that it would obtain and file with the necessary FDA documentation to show that the TS manufactured in China met FDA standards, but failed to do so. Bryan filed CPA, breach of contract, breach of implied covenant of good faith and fair dealing, promissory estoppel, negligent misrepresentation, and fraud claims against ChemWerth.

In response to Bryan’s claims that ChemWerth induced it to buy TS in violation of the CPA, ChemWerth responded that Waldmen was responsible for all damages allegedly suffered by Bryan. Waldman served as consultants to Bryan in its development of TS products during the period at issue in this litigation. ChemWerth alleged that Waldmen made material representations regarding, among other things, the Chinese TS manufacturer’s capabilities, the acceptability of the manufacturer’s TS for use in Bryan products, and the proximate cause for FDA’s refused to accept Bryan’s application concerning the TS products.

ChemWerth originally filed a third-party complaint against Waldman for contribution and/or indemnity for all or any portion of the amounts for which ChemWerth may be adjudged liable to Bryan. In response to Waldman’s motion to dismiss the third-party complaint ChemWerth filed a motion for leave to file an amended third-party complaint for, among other things, CPA violations.

The CPA claim filed by ChemWerth was not futile as a matter of law, according to the court. Waldman’s challenge to all of the claims of misrepresentation was that ChemWerth knew and understood that it was responsible for providing a product that met FDA approval. However, ChemWerth’s position that it informed Waldman that the Chinese TS manufacturer could not provide product that met FDA approval was sufficient to state misrepresentation claims. Even negligent misrepresentations may rise to the level of an unfair or deceptive act or practice under the CPA. ChemWerth also sufficiently stated its theory that Waldman wrongfully induced ChemWerth to continue its development efforts with the Chinese TS manufacturer despite knowing that the efforts would be futile. Therefore, the court granted ChemWerth’s motion for leave to file an amended third-party complaint against Waldman.

The case is No. 12-10446-MLW.

Attorneys: John J. Commisso (Jackson Lewis LLP) for Bryan Corp. Alyson J. DiLena (St. Onge Steward Johnston & Reens LLC) for ChemWerth, Inc.

Companies: Bryan Corp.; ChemWerth, Inc.; Waldman Biomedical Consultancy, Inc.

Cases: StateUnfairTradePractices MassachusettsNews