Delaware Business Litigation Report

Chancery Relies on Unanimous Dictionary Entries To Confirm Unambiguity of Supply Agreement

Thermo Fisher Scientific PSG Corp. v. Arranta Bio MA, LLC, C.A. No. 2022-0608-NAC (Del. Ch. Apr. 4, 2023)
The plaintiff and the defendant entered into a supply agreement under which the defendant would manufacture plasmids, a central component for a variety of therapies and vaccines. The agreement included a non-compete provision that would require the defendant to pause its plasmid activities for three years if the defendant was acquired by one of the plaintiff's competitors—defined as a company deriving at least fifty percent of revenue from "biopharmaceutical" development or commercial manufacturing services. The agreement did not define the term "biopharmaceutical." Two years into the agreement, a third party acquired the defendant. The acquirer derived almost all its revenue in connection with small-molecule drugs, with almost no revenue connected to biologics. Plaintiff filed suit, alleging that the acquirer was a competitor and seeking specific performance of the non-compete provision.

The Court of Chancery ruled in favor of the defendant, finding that the acquirer was not a competitor of the plaintiff under the unambiguous terms of the supply agreement. Explaining that Delaware courts look to dictionaries for assistance in determining the plain meaning of terms that are not defined in a contract, the Court pointed to the five separate dictionary definitions presented at trial, all of which were in accord in defining "biopharmaceutical" to include only large-molecule biologics, not small-molecule pharmaceuticals. The Court gave no weight to the extrinsic evidence of the plaintiff's expert testimony, which was that "biopharmaceutical" had an industry meaning different from dictionary definitions. As it was undisputed that the acquirer did not derive more than fifty percent of its revenue from biopharmaceuticals, its acquisition of the defendant did not trigger the supply agreement's non-compete provision.

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