MONTH-IN-BRIEF (Feb 2020)
Delaware Court Finds Information Rights Claim Barred by Res Judicata
By John Adgent
On February 13, 2020, the Delaware Chancery Court (the “Court”) applied the doctrine of res judicata to dismiss a breach of contract claim brought by Fortis Advisors, LLC, a provider of private merger and acquisition post-closing shareholder representative services (“Fortis”), against Shire US Holdings, Inc., a specialty biopharmaceutical company (“Shire”). Fortis first sued Shire in 2016 on behalf of the former stockholders of SARcode Bioscience Inc., maker of the drug candidate Lifitegrast for the treatment of dry eyes (“SARcode”), for milestone payments it alleged were owed from Shire’s 2013 acquisition of SARcode (the “2016 Action”). The Court dismissed the 2016 Action after determining Shire owed no payments under the clear language of the merger agreement.
Thereafter, Fortis sought information from Shire concerning the methodology that Shire employed to determine that no milestone payments were owed. When Shire did not provide the requested information, Fortis sued Shire in an attempt to enforce the merger agreement’s information rights provision. In response, Shire invoked res judicata as a basis to dismiss this second claim. Fortis countered that res judicata did not bar its claim because, among other reasons, the claim did not arise from the same transaction, leaving the third element of res judicata unsatisfied. Specifically, Fortis alleged that Shire breached the information rights provision by failing to provide the information requested and this breach postdated the filing of the 2016 Action. Thus, according to Fortis, the breach could not have been the subject of that action.