No-Suit Agreement Isn’t Enough to Toss Lawsuit

     MINNEAPOLIS (CN) – A company that sued 3M in Germany cannot use an agreement not to sue as cause to dismiss its opponents’ countersuit, a federal judge ruled.
     3M and Ivoclar Vivadent AG, based in Liechtenstein, signed a confidential disclosure agreement (CDA), which included an agreement not to sue, in November 2011 while trying to sort out patent claims.
     A month earlier, Ivoclar had sent a letter claiming that 3M’s Filtek brand of dental filling compounds infringed on Ivoclar patents.
     Although Ivoclar had already filed suit in Germany, it agreed not to pay the service-of-process fee, ensuring that the case would not move forward.
     Less than a month later, however, Ivoclar paid the fee, and 3M was served on Nov. 30. The Delaware-based Fortune Top 100 company learned in a telephone conference that Ivoclar said it was terminating the CDA.
     On the same day, 3M sued Ivoclar in the District Court of Minnesota. On Dec. 1, Ivoclar filed a patent-infringement case in the District Court of Delaware.
     Ivoclar then moved to dismiss 3M’s case by claiming that the action was barred by the CDA, but U.S. District Court Judge Ann Montgomery refused Thursday.
     “Even if the CDA was not terminated and 3M breached the CDA by initiating this lawsuit, as urged by Ivoclar AG, under Minnesota law dismissal of 3M’s claims is not a remedy for that breach,” Montgomery wrote.
     The 10-page decision relies on precedent from a 2008 decision by the Minnesota Court of Appeals in Kunza v. St. Mary’s Regional Health Center.
     “The Kunza court reasoned that a permanent covenant not to sure (i.e. a release) is a relinquishment of cause of action, whereas a temporary covenant not to sue is only an agreement to temporarily refrain from bringing a cause of action,” Montgomery wrote. “The Kunza court explained that dismissal is an appropriate remedy for a release because it prevents circuity of actions – the monetary damages for a breach of a release would be equal to whatever damages were recovered by the breaching party. The Kunza court then concluded that because damages for breach of a temporary covenant not to sue will not mirror damages in an action brought in breach of the covenant, as they do for a release, dismissal is not appropriate.”
     Ivoclar fought application of Kunza based on its venue dispute with 3M. It also said Kunza ended in summary judgment and had statute-of-limitations issues.
     These claims did not sway Montgomery.
     “None of these facts, however, influenced the rationale of the Minnesota Court of Appeals in Kunza,” she wrote . “Rather, the Kunza court reasoned that without relinquishment of a claim, a cause of action was not extinguished, and therefore dismissal was not appropriate.”
     “Under Minnesota law, compelling specific performance requires both weighing of equities and remedies at law,” Montgomery added. “Here, compelling specific performance of the temporary covenant not to sue by dismissing this action would be unwarranted. Ivoclar AG has commenced a parallel action in Delaware. With that parallel lawsuit, litigation is now inevitable.”
     In addition to denying Ivoclar’s motion to dismiss, the judge Montgomery dismissed without prejudice claims that 3M filed against Ivoclar’s North American subsidiary.

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