ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, March 1, 2007

Abbott Laboratories v. Takeda Pharmaceutical Co., Ltd.

Posner_2On February 2, 2007, the Seventh Circuit (Posner, J.) enforced a forum-selection clause favoring Takeda, a Japanese pharmaceutial company, and thus affirmed the District Court's dismissal of Abbott Labs' suit brought in the Northern District of Illinois.  The full opinion can be found here.

The parties to the suit formed a 50/50 joint venture, which became the Delaware Corporation, TAP Pharmaceuticals.  In 1995, Takeda contracted to supply TAP for ten years with a heartburn and acid reflux drug, Prevacid.  In 2004, just before the contract was due to expire, TAP's board voted to renew it.  Abbott brought suit alleging breach of fiduciary duty by Takeda.  Abbott alleged (and Judge Posner expressed some perplexity at the allegation) that Takeda had coerced Abbott to instruct its TAP directors to approve the contract renewal, even though TAP thereby agreed to an excessive price.

The Agreement that created TAP provided that it should be governed by Illinois law but that disputes "arising from, concerning or in any way relating to" the Agreement should be brought in Japan if Abbott is plaintiff. 

The Seventh Circuit first determined that Illinois law governed the validitity of the forum selection clause (Clause) and that the Clause is valid under Illinois law, while noting that the outcome would be the same under federal law.  Moving on to the interpretation of the Clause, the court noted that the Clause was broadly worded "and at least as a semantic matter . . .  certainly embraces Abbott's suit." 

Abbott argued that its suit did not "relate to" the Agreement because the suit could be adjudicated without any interpretation of the Agreement.  Abbott's claim sounds in tort law; specifically, Delaware's law governing the fiduciary duty of partners in a joint venture.  The Seventh Circuit rejected this argument, noting that the Clause covers not only "claims" that relate to the Agreement but "disputes" that relate to it.

Finally, the court dispensed with Abbott's argument that it would be unreasonable to force it to litigate its suit in Japan. 

But what Abbott means by "unreasonable" is simply that Japan is a less convenient forum than Illinois for the litigation of this dispute.  Maybe so.  And maybe therefore if the choice of forum were governed by the doctrine of forum non conveniens Abbott would be permitted to remain in Illinois . . . .  But a forum selection clause is a substitute for the doctrine, not another name for it. . . .

In short, the court ruled that Abbott is bound by its original choice to include the Clause in the Agreement.  Judge Posner expressed some doubt that Delaware's law would actually govern (it might be Illinois law).  In any case, Judge Posner expressed his confidence in the abilities of the Japanese courts to resolve issues of American fiduciary law.  Seems right, so long as there is a ready Japanese analog for "punctilio."

[Jeremy Telman]

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