The plaintiff, Birmingham, along with a group of investors, entered into a funding agreement with defendant’s subsidiary, ALVE, which served as a holding company for intellectual property of the defendant, Abbott. The funding agreement related to the development of a stent product and contemplated successor stent product, and contained a broad arbitration provision. Pursuant to the funding agreement, ALVE and Abbott were to use commercially reasonable efforts to obtain regulatory approval of these products. Concurrent with the funding agreement, Abbott entered into a “keep well” agreement with ALVE obligating Abbott to guarantee ALVE’s performance under the funding agreement. The keep well agreement identifies Birmingham and the investors as its intended beneficiaries, and incorporated by reference provisions of the funding agreement. The keep well agreement did not contain an arbitration provision. Subsequently, Abbott decided not to pursue development of the stent product. Birmingham believed that the termination of the development was improper, and that the stent had significant commercial potential. It filed a lawsuit alleging that Abbott abandoned the stent because it wished to focus on a different stent, thereby breaching the keep well agreement. Abbott moved to compel arbitration pursuant to the funding agreement’s arbitration provision.
The court granted the motion to compel arbitration, citing the strong federal policy favoring arbitration and the estoppel doctrine, under which a non-signatory may compel arbitration where: (1) there is a close relationship between the parties and controversies and (2) the signatory’s claims against the non-signatory are intimately founded in and intertwined with the underlying agreement containing the arbitration provision. The court initially found that there was a close relationship between Abbott and ALVE and the controversy at issue because of those parties’ parent-subsidiary relationship. The second prong was also satisfied because the dispute between Birmingham and Abbott in the lawsuit was directly related to the terms of the funding agreement. Birmingham Associates Ltd. v. Abbott Laboratories, Case No. 07 Civ. 11332 (USDC S.D.N.Y. Apr. 14, 2008).
This post written by Brian Perryman.