WT Representative LLC v. Philips Holdings USA Inc.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

WT REPRESENTATIVE LLC in its )
Capacity as Securityholder Representative,
)
)
Plaintiff, )
)
v. ) C.A. No. 2024-0170 PRW
)
PHILIPS HOLDINGS USA INC., )
)
Defendant. )

Submitted: July 23, 2024
Decided: August 16, 2024

Upon Defendant Philips Holdings USA Inc.’s Motion to Dismiss,
DENIED, in part; GRANTED, in part.

MEMORANDUM OPINION AND ORDER

C. Barr Flinn, Esquire, Paul J. Loughman, Esquire, Michael A. Carbonara, Jr.,
Esquire, YOUNG CONAWAY STARGATT & TAYLOR LLP, Wilmington, Delaware, Eric
Leon, Esquire (argued), LATHAM & WATKINS LLP, New York, New York, Nathan
A. Sandals, Esquire, LATHAM & WATKINS LLP, Boston, Massachusetts, Attorneys
for Plaintiff WT Representative LLC in its Capacity as Securityholder
Representative.

Patricia L. Enerio, Esquire, Emily A. Letcher, Esquire, HEYMAN ENERIO GATTUSO
& HIRZELL LLP, Wilmington, Delaware, Laurence A. Schoen, Esquire (argued),
Breton Leone-Quick, Esquire, MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO,
P.C., Boston, Massachusetts, Attorneys for Defendant Philips Holdings USA Inc.

WALLACE, J.1

1
Sitting by designation of the Chief Justice pursuant to In re Designation of Actions Filed
Pursuant to 8 Del. C. § 111 (Del. Sept. 18, 2023) (FIRST AMENDED ORDER).
I. FACTUAL AND PROCEDURAL BACKGROUND2

A. THE PARTIES

Plaintiff WT Representative LLC is based in Delaware and the designated

“Securityholder Representative” in the operative agreement.3 That agreement

involves the sale of Vesper Medical, Inc., a privately-held medical equipment

company and non-party to this action.4 Vesper created a minimally invasive stent

system known as the “DUO Venous Stent System” that allows medical professionals

to treat deep venous obstructions.5

Defendant Philips Holdings USA Inc. is a Delaware corporation and the

“Parent” under the operative agreement.6

B. THE FDA PRE-APPROVAL PROCESS

In 2016, Vesper began the FDA approval process for its DUO Venous Stent

System.7 To meet the FDA’s requirements, Vesper first needed to obtain approval of

2
This background is drawn from the pleadings, which include the Verified Complaint and the
documents incorporated therein. See Allen v. Encore Energy Pr’s, L.P., 72 A.3d 93, 96 n.2 (Del.
2013) (“Generally, a judge should not consider matters outside of the pleadings when he rules on
a Court of Chancery Rule 12(b)(6) motion. A judge may consider documents outside of the
pleadings only when: (1) the document is integral to a plaintiff’s claim and incorporated in the
complaint or (2) the document is not being relied upon to prove the truth of its contents.”) (internal
citations omitted)).
3
Verified Complaint (“Compl”) ¶¶ 2, 7 (D.I. 1).
4
Id. ¶ 2.
5
Id. ¶ 1.
6
Id. ¶¶ 1, 8.
7
Id. ¶ 21.

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an Investigational Device Exemption (“IDE”).8 Vesper filed its initial IDE in

January 2019.9 In its initial IDE, Vesper included the entire catalog of DUO Venous

Stent System sizes, from narrowest to widest and shortest to longest.10 In turn, the

stents that were 10 millimeters in diameter—the narrowest in Vesper’s stent

catalog—were included in Vesper’s initial FDA filing.11

In 2020, Vesper amended its IDE.12 In the amended version, Vesper informed

the FDA that it would no longer utilize the 10mm stents in clinical trials.13 Vesper

removed the 10mm stents because it “had received clinician feedback indicating that

the 10mm diameter extension stents are unlikely to be utilized in iliofemoral

anatomy.”14 The FDA approved Vesper’s amended IDE later that year.15 Vesper then

began its clinical trial on the DUO Venous Stent System without the 10mm stent.16

C. THE MERGER AGREEMENT

In December 2021, Philips acquired Vesper via the “Merger Agreement.”17

8
Id. ¶¶ 20-21.
9
Id. ¶ 23.
10
Id. ¶ 24.
11
Id.
12
Id. ¶ 25.
13
Id.
14
Id.
15
Id. ¶ 26.
16
Id. ¶¶ 26-27.
17
Id. ¶¶ 2, 35; see generally id., Ex. B (“Merger Agreement”).

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In addition to the purchase price paid at closing, the Merger Agreement

provides for a potential “Milestone Payment” relating to the DUO Venous Stent

System.18 According to Section 2.8(a), “[WT Representative] shall be eligible to

receive a [Milestone Payment]” if “the FDA Authorization Milestone is achieved”

by specified dates.19 Section 2.8(a)(ii) further specifies the Milestone Payment

amount earned if FDA Authorization with respect to the first- or second-generation

systems is achieved on separate dates.20

FDA Authorization is defined in the Merger Agreement as “the receipt by

Parent from the FDA of an order approving a Premarket Approval application or

supplemental application . . . .”21 FDA Authorization Milestone is defined as “the

receipt by a member of the Parent Group of FDA Authorization for each of the DUO

Venous Stent First Generation System and the DUO Venous Stent Second

Generation System.”22

Both the first- and second-generation DUO Venous Stent Systems are defined

as well. The first-generation system is “comprised of the DUO-HYBRID Stent, the

18
Merger Agreement § 2.8.
19
Id. § 2.8(a)(i).
20
Id. § 2.8(a)(ii).
21
Id. § 2.8(h)(vii). “Premarket Approval” is a capitalized term in the Merger Agreement but is
not defined.
22
Id. § 2.8(h)(viii). “Parent Group” means Parent and Parent’s affiliates. Id. § 2.8(h)(xiii).

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DUO-EXTEND Stent and a pin and pull manual delivery system[.]”23 The second-

generation system is defined as “the DUO-HYBRID Stent, the DUO-EXTEND

Stent and the DUO Triaxial/Handle Stent Delivery System.”24

The “DUO-EXTEND Stent” is defined as:

the Company’s self-expanding venous stent intended to improve
luminal diameter in symptomatic venous outflow obstructions, which
integrates with the DUO-HYBRID Stent to treat longer lesions in the
following sizes: 10mm x 40mm, 10mm x 60mm, 10mm x 80mm,
10mm x 100mm, 10mm x 120mm, 10mm x 140mm, 12mm x 40mm,
12mm x 60mm, 12mm x 80mm, 12mm x 100mm, 12mm x 120mm,
12mm x 140mm, 14mm x 40mm, 14mm x 60mm, 14mm x 80mm,
14mm x 100mm, 14mm x 120mm, 14mm x 140mm, 16mm x 40mm,
16mm x 60mm, 16mm x 80mm, 16mm x 100mm, 16mm x 120mm,
16mm x 140mm.25

“Duo-HYBRID Stent” means:

the Company’s self-expanding venous stent intended to improve
luminal diameter in symptomatic venous outflow obstructions in the
following sizes: 12mm x 60mm, 12mm x 80mm, 12mm x 100mm,
12mm x 120mm, 12mm x 140mm, 12mm x 160mm, 14mm x 60mm,
14mm x 80mm, 14mm x 100mm, 14mm x 120mm, 14mm x 140mm,
14mm x 160mm, 16mm x 60mm, 16mm x 80mm, 16mm x 100mm,
16mm x 120mm, 16mm x 140mm, 16mm x 160mm, 18mm x 60mm,
18mm x 80mm, 18mm x 100mm, 18mm x 120mm, 18mm x 140mm,
18mm x 160mm.26

Merger Agreement Section 2.8(b) provides certain “FDA Authorization

23
Id. § 2.8(h)(v).
24
Id. § 2.8(h)(vi).
25
Id. § 2.8(h)(ii).
26
Id. § 2.8(h)(iii).

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Obligations.”27 Relevant here, it says:

From and after the Closing, until the earlier of the achievement of the
FDA Authorization Milestone and December 31, 2024, Parent shall,
directly or through its controlled Affiliates, use Commercially
Reasonable Efforts to achieve the FDA Authorization Milestone
(including with respect to achieving FDA Authorization for both the
DUO Venous Stent First Generation System and the DUO Venous Stent
Second Generation System) . . . .28

“Commercially Reasonable Efforts” is defined as follows:

such reasonable, good faith efforts and resources as a medical device
company of a similar size and with similar revenues as Parent and the
other members of the Parent Group would normally use to accomplish
a similar objective, activity or decision under similar circumstances and
with respect to similar objectives, it being understood and agreed that
such efforts and resources shall be consistent with those efforts and
resources commonly used by such a medical device company under
similar circumstances for a similar product owned by it, or to which it
has similar rights, which product is at a similar stage in its product life
and is of similar market potential, taking into account all relevant
factors, including . . . (E) the likelihood and difficulty of obtaining
Regulatory Approval in the United States . . . .29

Under 2.8(b)(iii), “Parent (and its controlled Affiliates) shall not take any action in

bad faith with the primary purpose of avoiding or minimizing the amount of the

Milestone Payment.”30

Section 2.8(c) is titled “Post-Closing Operations” and details how Philips

27
Id. § 2.8(b).
28
Id. § 2.8(b)(i).
29
Id. § 2.8(h)(i).
30
Id. § 2.8(b)(iii).

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must operate Vesper after the closing.31 Relevant here, it provides that “Parent shall

have sole discretion over all matters relating to . . . the pursuit of the FDA

Authorization Milestone” and that “Parent is under no obligation to operate the

business of the Company to maximize the Milestone Payment.” 32 It also specifies

that “that there is no assurance that any Milestone Payment will be realized by the

Securityholders and that no member of the Parent Group or any Representative

thereof has promised or projected any specific amount.”33

D. FDA APPROVAL, BUT NO MILESTONE PAYMENT

Soon after the Merger Agreement closed, the DUO Venous Stent System

clinical trials were completed.34 Vesper (now operated by Philips) then submitted a

Pre-Market Approval (“PMA”) application to the FDA.35 The PMA application

attached to the complaint36 provides the Duo Venous Stent System configurations,

categorized by type, diameter, length, and delivery system.37 Consistent with the

31
Id. § 2.8(c).
32
Id. § 2.8(c)(i).
33
Id.
34
Compl. ¶ 45.
35
Id. ¶ 47; id., Exs. C.1-C.2 (“PMA Application”).
36
Philips disputes the authenticity of the PMA application attached to the complaint. But that
quibble ultimately boils down to a factual dispute inappropriate for resolution at this pleadings
stage.
37
PMA Application at 4.

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amended IDE, the attached PMA application doesn’t include the 10mm stents.38

Otherwise, all stent measurements listed in the Merger Agreement are included in

the attached PMA.39

In late 2023, the FDA issued its order approving the PMA application.40 The

FDA thus authorized Vesper to market the DUO system in every configuration

included in the PMA, “inclusive of the First Generation and Second Generation

delivery devices.”41

In early 2024, Philips informed WT Representative that Vesper did not

achieve the FDA Authorization Milestone because the FDA’s approval order did not

include approval for 10mm stents.42 After exhausting the Merger Agreement’s

dispute resolution procedures, WT Representative brought this suit.43

In its February 2024 complaint, WT Representative pens three breach-of-

contract counts against Philips: breach of contract for failing to make a Milestone

Payment (Count I);44 breach of contract for failing to use Commercially Reasonable

38
See id.
39
Id.
40
Compl. ¶ 48.
41
Id.
42
Id.¶ 49.
43
Id. ¶¶ 50-52.
44
Id. ¶¶ 56-60.

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Efforts to achieve the FDA Authorization Milestone (Count II);45 and, breach of

contract for acting in bad faith to avoid making the Milestone Payment (Count III).46

Philips has moved to dismiss the complaint in its entirety.47

II. PARTIES’ CONTENTIONS

As to WT Representative’s Count I, Philips says that the Merger Agreement’s

plain language requires approval of all enumerated stent sizes—including the 10mm

diameter stents—to trigger a Milestone Payment.48 In response to Count II, Philips

contends that it did, in fact, seek FDA approval for the 10mm stents.49 Philips also

says that WT Representative fails to adequately plead its second count based on the

Merger Agreement’s language governing commercially reasonable efforts.50 With

reference to Count III, Philips argues that the complaint lacks conceivable facts

demonstrating any bad faith.51

WT Representative opposes Philips’ motion to dismiss.52 WT Representative

45
Id. ¶¶ 61-65.
46
Id. ¶¶ 66-70.
47
See generally Opening Brief in Support of Philips Holding USA Inc.’s Motion to Dismiss
Plaintiff’s Complaint (“Philips’ Mot. to Dismiss”) (D.I. 20).
48
Id. at 26-35.
49
Id. at 14-23, 44-49.
50
Id. at 35-44.
51
Id. at 44-49.
52
See generally Plaintiff WT Representative LLC’s Answering Brief in Opposition to Defendant
Philips Holding USA Inc.’s Motion to Dismiss (“WT Representative’s Answering Br.”) (D.I. 27).
WT Representative hasn’t filed an opposition to Philips’ motion to stay. The parties, though, did
stipulate that Philips must reply to WT Representative’s requests for production within 10 days of

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says that the Merger Agreement simply requires FDA Approval of the DUO Venous

Systems included in the PMA application; not FDA Approval of all sizes contained

in the Merger Agreement.53 WT Representative also contends that, to the extent that

10mm stents were required for the Milestone Payment, Philips’ failure to include

them in its PMA application constituted breaches of the Merger Agreement’s

commercially reasonable efforts and bad faith provisions.54

III. APPLICABLE LEGAL STANDARD

“When considering a Rule 12(b)(6) motion, the court (i) accepts as true all

well-pled factual allegations in the complaint, (ii) credits vague allegations if they

give the opposing party notice of the claim, and (iii) draws all reasonable inferences

in [the plaintiff’s] favor[.]”55 “Dismissal is inappropriate ‘unless the plaintiff would

not be entitled to recover under any reasonably conceivable set of circumstances.’”56

IV. ANALYSIS

Philips moves to dismiss WT Representative’s three breach-of-contract

counts.57 Delaware governs the Merger Agreement, so its proper construction is a

any denial by the Court. D.I. 24.
53
WT Representative’s Answering Br. at 22-32.
54
Id. at 32-39.
55
Ont. Provincial Council of Carpenters’ Pension Tr. Fund v. Walton, 294 A.3d 65, 84 (Del. Ch.
2023) (citing Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 535 (Del.
2011)).
56
Id. (citing Cent. Mortg. Co., 27 A.3d at 535).
57
See generally Philips’ Mot. to Dismiss.

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question of law.58 “A court must accept and apply the plain meaning of an

unambiguous term in . . . the contract language . . ., insofar as the parties would have

agreed ex ante.”59 A contract “is not ambiguous simply because the parties disagree

on its meaning.”60 Rather ambiguity exists only if disputed contract language is

“fairly or reasonably susceptible of more than one meaning.”61 And “[a]bsent some

ambiguity, Delaware courts will not destroy or twist [contract] language under the

guise of construing it.”62

As a question of law, a contract’s proper interpretation might be resolved on

a pleadings-stage motion.63 But, at the pleadings stage, the movant must show the

terms supporting its motion are indeed unambiguous.64 And the Court “cannot

58
E.g., Exelon Generation Acquisitions, LLC v. Deere & Co., 176 A.3d 1262, 1266–67 (Del.
2017).
59
Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 740 (Del. 2006).
60
E.I. du Pont de Nemours & Co. v. Allstate Ins. Co., 693 A.2d 1059, 1061 (Del. 1997);
see also Sunline Com. Carriers, Inc. v. CITGO Petroleum Corp., 206 A.3d 836, 847 n.68 (Del.
2019) (explaining that, because a contract’s meaning is a question of law, a court, not the parties,
must decide whether the contract is ambiguous or not).
61
Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012) (citing GMG Cap. Invs.,
LLC v. Athenian Venture Part. I, L.P., 36 A.3d 776, 780 (Del. 2012)).
62
Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992)
(citing Hallowell v. State Farm Mut. Auto. Ins. Co., 443 A.2d 925, 926 (Del. Super. Ct. 1982)).
63
See, e.g., Allied Cap. Corp. v. GC-Sun Holdings, L.P., 910 A.2d 1020, 1030 (Del. Ch. 2006)
(“Under Delaware law, the proper interpretation of language in a contract is a question of law.
Accordingly, a motion to dismiss is a proper framework for determining the meaning of contract
language.”).
64
See, e.g., VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 615 (Del. 2003); GMG
Cap. Invs., LLC, 36 A.3d at 783 (“[W]here reasonable minds could differ as to the contract’s
meaning, a factual dispute results . . . . In those cases, [judgment as a matter of law] is improper.”
(citations omitted)).

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choose between two differing reasonable interpretations of ambiguous” contract

language.65 So, to succeed, the movant’s interpretation must be “the only reasonable

construction as a matter of law.”66 Otherwise, “for purposes of deciding” the motion,

the language must be resolved in the non-movant’s favor.67

1. Count I survives because WT Representative’s Milestone Payment
interpretation is reasonable.

In its first count, WT Representative alleges that Philips breached the Merger

Agreement by failing to make the Milestone Payment.68 WT Representative

contends that the Milestone Payment’s requirements were satisfied by the FDA’s

approval order.69

Merger Agreement Section 2.8 says that a Milestone Payment is owed if “the

FDA Authorization Milestone is achieved[.]”70 FDA Authorization Milestone is

defined as “the receipt by a member of the Parent Group of FDA Authorization for

65
Vanderbilt Income & Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691 A.2d 609,
613 (Del. 1996); see also Appriva S’holder Litig. Co., LLC v. EV3, Inc., 937 A.2d 1275, 1292 (Del.
2007) (“Even if the Court considers the movant’s interpretation more reasonable than the non-
movant’s, on a Rule 12(b)(6) motion it is error to select the ‘more reasonable’ interpretation as
legally controlling.” (cleaned up)).
66
VLIW Tech., 840 A.2d at 615 (emphasis in original).
67
Id.; see also CRE Niagara Holdings, LLC v. Resorts Grp., Inc., 2021 WL 1292792, at *10
(Del. Super. Ct. Apr. 7, 2021) (“Faced with a question of contract interpretation on a motion to
dismiss, the Court must determine whether the contractual language is unambiguous. If so, the
Court must give effect to its meaning. If, however, the contractual language is ambiguous, the
Court must resolve the ambiguity in favor of the non-moving party.” (cleaned up)).
68
Compl. ¶¶ 56-60.
69
Id.
70
Merger Agreement § 2.8(a)(i).

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each of the DUO Venous Stent First Generation System and the DUO Venous Stent

Second Generation System.”71 FDA Authorization is defined in relevant part as “the

receipt by Parent from the FDA of an order approving a Premarket Approval

application or supplemental application.”72 The DUO Venous Stent first- and

second-generation-system definitions both include “the Company’s stent system

designed for the treatment of patients with chronic venous insufficiency, which is

comprised of the DUO-HYBRID Stent, the DUO-EXTEND Stent” and specified

delivery systems.73 And both the DUO-HYBRID Stent and the DUO-EXTENT

Stent are defined to include stents in multiple sizes, including the 10mm stent.74

The FDA’s approval is undoubtedly “an order approving a Premarket

Approval application.” The PMA application in question was submitted to the FDA

by Philips, who had “sole discretion” over its contents under the Merger

Agreement.75 And, although the actual order doesn’t appear to be attached for the

Court’s review,76 the complaint alleges that the FDA approved the DUO Venous

71
Id. § 2.8(h)(viii) (emphasis added).
72
Id. § 2.8(h)(vii) (emphasis added).
73
Id. §§ 2.8(h)(v), (vi).
74
Id. §§ 2.8(h)(ii), (iii).
75
See id. § 2.8(c)(i).
76
There is a summary of the FDA’s findings attached to Philips’ Motion to Dismiss as an exhibit.
See Philips’ Mot. to Dismiss, Ex. 13 (“FDA Summary”). That attachment appears to be identical
to the PMA application attached to the complaint and is dated the same as when the complaint
states the FDA issued its order. See PMA Application; Compl. ¶ 48.

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Stent System in all sizes submitted to it by Philips.77

The question, then, is whether the Merger Agreement required FDA approval

of the first-generation and second-generation DUO Venous Stent Systems in all

defined stent sizes, or just approval of the first-and second-generation systems in the

sizes submitted.

Reading the Merger Agreement in a light most favorable to

WT Representative, it’s reasonably conceivable that the parties indeed intended for

the FDA’s approval to trigger a Milestone Payment if that approval was for the first-

and second-generation DUO Venous Stent systems included in the PMA application.

It’s also reasonable to read “each of the DUO Venous Stent First Generation System

and the DUO Venous Stent Second Generation System” as merely requiring

approval “of the Company’s stent system”; not of every size listed in the DUO-

EXTEND Stent and DUO-HYBRID Stent definitions.78 And, accepting the

complaint’s facts as true, it appears that the FDA approval order did approve the

77
Compl. ¶ 48.
78
The FDA allegedly approved the first- and second-generation systems; but not the 10mm stents
that weren’t submitted. The PMA application, submitted by Philips with full knowledge of the
Merger Agreement’s requirements and the FDA’s inquiry regarding sizes, also didn’t include the
10mm stents. The PMA application and FDA approval order details, along with Philips’
knowledge and intent relating to those 10mm stents—for the purposes of this count and WT
Representative’s surviving bad faith claim—can be properly revealed and resolved through
discovery. See Khushaim v. Tullow Inc., 2016 WL 3594752, at *3 (Del. Super. Ct. June 27, 2016)
(“[W]hen parties present differing—but reasonable—interpretations of a contract term, the Court
must examine extrinsic evidence to discern the parties’ agreement; such an inquiry cannot proceed
on a motion to dismiss.” (alteration and internal quotation marks omitted)).

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PMA application for the first- and second-generation DUO Venous Stent Systems in

all sizes submitted to it.

Philips counters that the Merger Agreement requires approval of the first- and

second-generation systems in all defined sizes.79 In support, Philips points to the

Merger Agreement’s language allowing for partial Milestone Payments if either

generation stent is approved, but no language for partial satisfaction if not all of the

stent’s various sizes were approved.80 Although Philips interpretation might be

considered reasonable too, it isn’t the only reasonable construction as a matter of

law.81 Because WT Representative has proffered a reasonable interpretation of the

Merger Agreement, WT Representative’s Count I survives at this pleading stage.

2. WT Representative’s second breach-of-contact claim (Count II)
alleging that Philips failed to use Commercially Reasonable Efforts is
inadequately pled.

In its second count, WT Representative alleges that Philips breached the

Merger Agreement by failing to use commercially reasonable efforts as required to

achieve the FDA Authorization Milestone.82 Merger Agreement Section 2.8 requires

Philips to “use Commercially Reasonable Efforts to achieve the FDA Authorization

Milestone (including with respect to achieving FDA Authorization for both the DUO

79
Philips’ Mot. to Dismiss at 26-35.
80
Id. at 28-31.
81
See VLIW Tech., 840 A.2d at 615.
82
Compl. ¶¶ 61-65.

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Venous Stent First Generation System and the DUO Venous Stent Second

Generation System).”83

WT Representative insists that, to the extent the FDA Authorization Milestone

required FDA approval of the 10mm stents, Philips breached its obligation to use

Commercially Reasonable Efforts by not including the 10mm stents in its clinical

trial or PMA application.84 Philips says that it did, in fact, include the 10mm stents

in the PMA application it submitted to the FDA.85 And Philips provides numerous

documents to prove so.86 Facing disputed material facts—stemming from attached

documents that lie outside the pleadings—the Court can’t yet resolve the question

of whether Philips submitted the 10mm stents to the FDA in its PMA application.87

But WT Representative’s second count fails for a different reason.

The Merger Agreement’s commercially reasonable efforts provision is an

external-facing provision. Such provisions require the “relevant yardstick”88 of

83
Merger Agreement § 2.8(b)(i).
84
Compl. ¶ 64.
85
Philips’ Mot. to Dismiss at 14-23.
86
See id., Exs. 4, 7, 10, 11, 15, 16, 18.
87
See Malpiede v. Townson, 780 A.2d 1075, 1082 (Del. 2001) (explaining that a motion to
dismiss must be “decided without the benefit of a factual record” and thus, a court “may not resolve
material factual disputes”); In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del.
2006) (“all well-pleaded factual allegations are accepted as true”); Doe 30’s Mother v. Bradley, 58
A.3d 429, 445 (Del. Super. Ct. 2012) (“[T]he Court will not adjudicate contested issues of fact on
a motion to dismiss, nor will it deem a pleading inadequate under Rule 12(b)(6) simply because a
defendant presents facts that appear to contradict those plead by the plaintiff.”).
88
Neurvana Med., LLC v. Balt USA, LLC, 2020 WL 949917, at *17 (Del. Ch. Feb. 27, 2020)

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“efforts and resources comparable to those used by a similarly situated entity.”89

And this Court has dismissed complaints alleging breaches of similar provisions that

“did not identify a single similarly situated entity.”90

The external-facing “Commercially Reasonable Efforts” provision employed

here requires:

such reasonable, good faith efforts and resources as a medical device
company of a similar size and with similar revenues as Parent and the
other members of the Parent Group would normally use to accomplish
a similar objective, activity or decision under similar circumstances and
with respect to similar objectives, it being understood and agreed that
such efforts and resources shall be consistent with those efforts and
resources commonly used by such a medical device company under
similar circumstances for a similar product owned by it, or to which it
has similar rights, which product is at a similar stage in its product life
and is of similar market potential . . . .91

As defined, the Commercially Reasonable Efforts provision unambiguously requires

that Philips use reasonable, good-faith efforts and resources similar to a medical

company of a similar size and with similar revenues to it. The provision further

(quoting Himawan v. Cephalon, Inc., 2018 WL 6822708, at *8 (Del. Ch. Dec. 28, 2018)).
89
FMLS Holding Co. v. Integris BioServices, LLC, 2023 WL 7297238, at *7 (Del. Ch. Oct. 30,
2023) (citation and internal quotation marks omitted).
90
Compare Himawan, 2018 WL 6822708, at *6–8 (denying a motion to dismiss a commercially-
reasonable-efforts provision breach claim when the plaintiffs alleged that the defendant refused to
commercialize an antibody treatment that peer companies were commercializing, noting that “the
actions of other similarly situated companies are a relevant yardstick to decide at this stage in the
pleadings whether [the defendant] used ‘commercially reasonable efforts’”), with Neurvana Med.,
LLC, 2020 WL 949917, at *15–17 (dismissing claim for breach of commercially-reasonable-
efforts provision in a post-closing earn-out context when the seller only alleged a poor relationship
and disagreement over strategy with the buyer, without referencing similarly situated companies).
91
Merger Agreement § 2.8(h)(i) (emphasis added).

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requires that those efforts are consistent with those commonly used by such a

medical-device company under similar circumstances for a similar product owned

by it.

WT Representative’s complaint ignores those requirements completely.

Instead, the complaint simply asserts that Philips’ failure to include the 10mm stents

in its PMA application amounts to a breach of the Commercially Reasonable Efforts

provision.92 There’s no reference to similarly situated companies or products in the

complaint whatsoever. Even when drawing all reasonable inferences in its favor,

WT Representative hasn’t adequately pled that Philips breached the Merger

Agreement by not using Commercially Reasonable Efforts. So, its second breach-

of-contract count must be dismissed.

3. WT Representative’s bad faith claim (Count III) survives dismissal.

In its third breach-of-contract count, WT Representative says that Philips

breached the Merger Agreement by acting in bad faith.93 Merger Agreement Section

2.8(b)(iii) requires that Philips “not take any action in bad faith with the primary

purpose of avoiding or minimizing the amount of the Milestone Payment.”94 Bad

faith isn’t defined in the Merger Agreement.

92
Compl. ¶¶ 54, 64-65.
93
Id. ¶¶ 66-70.
94
Merger Agreement § 2.8(b)(iii).

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WT Representative alleges that Philips acted in bad faith by “taking no action

to include the 10mm stent in the VIVID clinical trial, compile the clinical trial data

needed to obtain FDA approval of this stent size, or include the diameter size in the

PMA Application.”95 The complaint further states that “if Philips believed FDA

approval of the 10mm stent was a predicate to achievement of the Milestone,

Philips’s failure to take any action to obtain such approval can only be explained as

a bad faith attempt by Philips to avoid the Milestone Payment.”96

At this stage, the Court must accept all well-pled facts in the complaint as

true.97 As such, it is reasonably conceivable that Philips acted in bad faith by failing

to sufficiently request FDA approval of the 10mm stents while aware that the

Milestone Payment required approval of those same 10mm stents. The decision not

to pursue 10mm-stent approval with that prior knowledge might indeed qualify as

bad faith here. And the claim may also survive as an alternative to WT

Representative’s Count I if discovery reveals that the parties did in fact intend for

10mm stents to trigger the Milestone Payment. Thus, drawing all reasonable

inferences in WT Representative’s favor, Philips’ bad faith claim is adequately pled.

95
Compl. ¶ 64.
96
Id. ¶ 69.
97
E.g., In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d at 168.

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V. CONCLUSION

For the foregoing reasons, Philips’ Motion to Dismiss as WT Representative’s

Counts I (Breach of Contract—Failure to Make Milestone Payment) and III (Breach

of Contract—Bad Faith) is DENIED. But dismissal is GRANTED on WT

Representative’s Count II (Breach of Contract—Failure to Use Commercially

Reasonable Efforts).

IT IS SO ORDERED.
/s/ Paul R. Wallace
______________________
Paul R. Wallace, J.

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