California businesses can’t be held liable for persuading one company they’re working with to end an at-will contract with another—unless they used wrongful means to achieve their goal, according to a Ninth Circuit decision.
The court on Thursday upheld a prior ruling in a case between Ixchel Pharma LLC and Biogen Inc., which had been remanded from the California Supreme Court.
The decision protects drugmakers from lawsuits in California when one company drops an at-will partnership with another because a competing business opportunity presents itself.
Ixchel had sued Biogen, alleging the biotech company tortuously interfered with a contract Ixchel had with Forward Pharma to collaborate on a new drug using an active ingredient known as DMF.
Forward executives decided to work with Biogen instead of Ixchel, striking a settlement and licensing agreement for Biogen to use DMF in a new multiple sclerosis drug.
Ixchel’s attorneys alleged that Biogen interfered with its own contract with Forward, potentially resulting in lost profits.
However, the Ninth Circuit found that “Ixchel did not plead an independently wrongful act. Thus, the district court did not err in holding that Ixchel failed to state a claim for tortious interference with contractual relations, intentional and negligent interference with prospective economic advantage, or a violation of” California’s unfair competition law.
The case is Ixchel Pharma LLC v. Biogen Inc., 9th Cir., No. 18-15258, 9/17/20.