Uitspraak
judgment
AMSTERDAM DISTRICT COURT
Netherlands Commercial Court
NCC District Court – Court in Summary Proceedings
Case number: NCC C/13/738325
Judgment
2 October 2023
Claimant:
Coöperatieve Federatie van Edelpelsdierenhouders Nederasselt U.A.,
Nederasselt, the Netherlands,
represented by Mr. M.A.F. Evers, Mr. S. van Steenbergen and Mr. R. van Boekel, lawyers, (AKD)
Defendant:
Ceva Santé Animale S.A.,
Libourne, France,
represented by Mr. G.W. van den Bend, Ms. S. Nagy, Mr. M.C. Eren and Ms. M. Simon Cartaya, lawyers, (De Brauw Blackstone Westbroek).
The parties are referred to below as ‘CFE’ and ‘Ceva’ respectively.
1.Procedural history
1.1.
On 23 August 2023, the Court granted CFE permission to serve a writ of summons with notice to appear at a court hearing in summary proceedings, to be held on 18 September 2023. The writ of summons (together with 30 exhibits) was subsequently served on 1 September 2023.
1.2.
On 15 September 2023, Ceva submitted its statement of defence (together with 50 exhibits).
1.3.
A courtroom hearing was held on 18 September 2023. At the hearing Messrs. [A] and [B] appeared on behalf of CFE, accompanied by CFE’s lawyers and Ms. [C] appeared on behalf of Ceva, accompanied by Ceva’s lawyers. At the hearing the lawyers of both parties submitted their pleading notes.
1.4.
At the conclusion of the hearing, the Court set judgment for today.
2.Background and facts
2.1.
CFE is the Dutch umbrella organisation for mink breeders. Apart from advocacy for the mink breeders sector and business support and guidance, CFE engages in the distribution and (re)sale of mink vaccines. Mink vaccines protect against certain diseases that can cause premature death.
2.2.
Until 2020, CFE, together with Biovet/Scanvet, owned a production facility for the production of mink vaccines in Verona, Wisconsin, U.S.A. (the Verona Facility). Prior to the construction of the Verona facility, CFE (co-)owned a production facility for mink vaccines in Fitchburg, Wisconsin, U.S.A. The vaccines in this latter facility were sold and distributed by CFE and Biovet/Scanvet in Europe, the United States and Canada.
2.3.
After the Verona Facility ran into financial difficulties in 2020, the administrator involved in the Chapter 11 proceedings under the U.S. Bankruptcy Code sold the Verona Facility to Ceva.
2.4.
Ceva is a multinational animal health company and develops and distributes animal health solutions for veterinarians, farmers and pet owners. Whereas Ceva was interested in acquiring the Verona Facility, it needed a steady sales market for the vaccines to be produced in that facility. On its part, CFE needed a reliable long-term supply of certain vaccines for resale in Europe, the United States and Canada. This is where CFE and Ceva found each other.
2.5.
Effective 22 March 2020 a Contract Manufacturing Agreement (the CMA) was concluded by, amongst others, Ceva and CFE. The CMA provides for the contract manufacturing of mink vaccines to the order of CFE in accordance with certain procedures and in accordance with a certain pricing scheme.
2.6.
Around the time that Ceva acquired the Verona Facility, Ceva also acquired the animal health business of IDT Biologika GmbH (IDT), and in particular IDT’s stock of mink vaccines, raw materials for the production of mink vaccines, and semi-finished products.
2.7.
Ceva, being the owner of the Verona Facility and IDT, holds a monopolistic market position for mink vaccines in Europe, the United States and Canada. No alternative (and admitted) mink vaccines are available on the market.
2.8.
In addition to the CMA, on 25 June 2020 the parties concluded a Distribution Agreement for the vaccines produced and held in stock by IDT. Under this Distribution Agreement Ceva supplied certain quantities of mink vaccines to CFE, until IDT’s stock was sold out. The Distribution Agreement has meanwhile been exhausted.
2.9.
Whereas the mink vaccines would be produced in the Verona Facility by Ceva’s affiliate company Biomune Company (Biomune), in the CMA (Article 15) Ceva has unconditionally and completely accepted all obligations of Biomune under the CMA as its own obligations and it has agreed that it is jointly and severally liable for all obligations of Biomune.
2.10.
In 2020 the COVID-19 crisis struck, which severely affected the mink business, as minks proved to be susceptible to the COVID-19 virus.
2.11.
The two most important mink vaccines to be produced in the Verona Facility are Distemink and Biocom-P.
2.12.
Mink vaccines are particularly required in June/July of each year as newly born minks, that usually are born in May, are to be vaccinated, and in January of each year, as female minks are to be vaccinated just before they are inseminated for the next breeding generation.
2.13.
For the year 2022 CFE ordered a total of 2,600,000 ml of Distemink for delivery in May 2022, of which only 737,500 ml was actually delivered in June 2022.
2.14.
On 7 June 2022 CFE placed orders with Ceva for Biocom-P for delivery before 1 May 2023. CFE has failed to deliver any Biocom-P during 2023.
2.15.
At various moments CFE has ordered and/or has amended its orders to different amounts of doses of Distemink for delivery in 2023. So far in 2023, Ceva has delivered 1,051,500 ml of Distemink to CFE.
2.16.
On 28 June 2023 CFE ordered with Ceva 6,000,000 ml of Distemink for the 2024 vaccination season, which order was confirmed on 12 July 2023 for delivery before 1 June 2024.
3.The claim
3.1.
CFE requests the Court by judgment having immediate effect to the extent possible to:
1. Order Ceva to comply with the CMA and the individual purchase agreement(s) ensuing therefrom, which implies in particular, that Ceva delivers to CFE, or at least ensures that Biomune delivers to CFE, 4,948,500 ml Distemink as soon as possible but ultimately within fourteen (14) days after service of judgment to Ceva, under penalty of a penalty payment of EUR 50,000.--, or at least a penalty payment to be determined by the Court, for each day or part thereof that Ceva fails to comply with the aforementioned obligation after service of the judgment to Cava;
2. Order Ceva to comply with the CMA, which implies, in particular, that Ceva confirms in writing to CFE, or at least ensures that Biomune confirms in writing to CFE, delivery of 6,000,000 ml [1] (ultimately) on 1 June 2024 against a unit price of USD 99.--, or at least with a (ultimate) delivery date and/or unit price to be determined by the Court, as soon as possible, but ultimately within fourteen (14) days after service of the judgment to Ceva, under penalty of a penalty payment of EUR 50,000.--, or at least a penalty payment to be determined by the Court, for each day or part thereof that Ceva fails to comply with the aforementioned obligation after service of the judgment to Ceva;
3. Order Ceva to pay the costs of these proceedings, including after-costs, with a determination of the salary of CFE’s lawyers, to AKD within fourteen (14) days of service of the judgment and, in so far as payment of the costs of the proceedings is not made within the prescribed period, to increase the amount by the statutory interest on the costs of the proceedings, from such period of payment.
3.2
CFE underlines its claims by asserting that under the CMA, Ceva has the obligation to supply certain quantities of mink vaccines against agreed prices. CFE has placed firm orders with Ceva, which have been confirmed by Ceva. Nonetheless, Ceva has failed to deliver most of the agreed quantities in 2023 and threatens to fail to comply with agreed quantities in 2024. As CFE is in urgent need of the vaccines, as the present mink population is largely unprotected, CFE requests the Court to order Ceva to deliver the missing quantities for 2023 as soon as possible and to order Ceva to confirm in writing that the required quantities will be delivered in 2024 on a timely basis.
3.3.
In short, Ceva contends that various circumstances, amongst which the consequences of the COVID-19 crisis, personnel shortages following the COVID-19 crisis, the unavailability of raw materials and semi-finished products required for the production of Distemink and a number of procurement, production and regulatory issues prevent Ceva from complying with its obligations under the CMA.
4.Discussion
Jurisdiction and applicable law
4.1.
The Amsterdam District Court (Netherlands Commercial Court in summary proceedings) has jurisdiction as the parties agreed in Article 16.2.b of the CMA, which is the basis of CFE’s claims in these proceedings, that in case of a dispute, the Chamber for International Commercial Matters of the Amsterdam District Court, in short the Netherlands Commercial Court or NCC, the parties shall be entitled to file a claim at that Court. Such contractual provision fulfils the requirements of Article 32a of the Dutch Code of Civil Procedure (DCCP) and consequently the NCC, sitting as Court in Summary Proceedings, is the appropriate venue to hear and rule on this dispute.
4.2.
Article 16.1 of the CMA states that the agreement, including further agreements arising therefrom, shall be governed and construed in accordance with Dutch law. Thus, the Court will apply Dutch law.
Urgent interest?
4.3.
The Court is sufficiently, notwithstanding Ceva’s arguments to the contrary, convinced that CFE has sufficient urgent interest in having its claims awarded as referred to in para. 3.1. above. CFE has demonstrated that the mink population of its members and customers is presently unprotected due to the unavailability of mink vaccines, which implies that the mink population could be affected by certain infections, which make them liable to disease and possible death. Animal welfare considerations alone make that CFE’s claims are of an urgent nature.
Decisive framework
4.4.
In these summary proceedings the Court has to assess and decide whether CFE’s claims will be upheld and/or confirmed in proceedings on the merits on the subject matter of the dispute at hand. Only when the Court is sufficiently convinced that any claim will be upheld and/or confirmed in proceedings on the merits, can any interim measure, as requested in these proceedings, be awarded. In this regard the Court reasons as follows.
On the merits of the case
4.5.
The legal basis for CFE’s claims is the CMA which was concluded between the parties following Ceva’s acquisition of the Verona Facility in 2020. The CMA is in its essence a straightforward contract, in that it provides for the supply of vaccines by Ceva to the order of CFE in accordance with certain ordering procedures against payment of a certain price.
4.6.
Whilst Ceva has terminated the CMA with immediate effect as far as Biocom-P is concerned and with effect from 12 September 2025 as far as Distemink is concerned, which termination, however, is contested by CFE, it is not in dispute that both parties are still bound by the provisions of the CMA for any deliveries of Distemink up to September 2025. Whether or not Ceva was entitled to terminate the CMA can therefore be left out of the equation, as these summary proceedings concern deliveries of Distemink during 2023 and 2024 and not beyond.
4.7.
With regard to the deliveries of Distemink in 2023, it is equally not in dispute that CFE received 1,051,500 ml of Distemink earlier in 2023. CFE now claims that the balance of its order for 2023 of 6,000,000 ml, or 4,985,500 ml be delivered within 14 days of service of this judgment on Ceva. However, Ceva does not accept that a firm order of 6,000,000 ml was ever confirmed for 2023. The Court rejects this argument on the part of Ceva for the following reasons.
4.8.
As Exhibit 15, CFE has submitted two signed purchase orders for the purchase of 2,000,000 ml of Distemink (2 June 2022) and 4,000,000 ml of Distemink (14 July 2022) respectively. Both purchase orders were made using Ceva’s standard purchase order forms.
4.9.
Subsequently, there has been some discussion between the parties about the number of doses to be delivered in 2023. However, setting the discussion about the actual number of doses aside, Ceva, by e-mail dated 15 September 2022 (22:38 hrs), informed CFE as follows:
I confirm that Ceva Verona can produce 6 million doses of Distemink for 2023.
As discussed with you over the phone today, beyond the order for 3 million doses as stated in your email below, please confirm a firm order for 4 million doses (3 million from your order below + 1 million more) and I can then plan a production of 2 million at risk to manage the extra orders you may have for delivery in 2023. Without this confirmation, Verona will only produce 3 million doses for delivery in 2023.
In this e-mail Ceva clearly confirms its ability to produce 6,000,000 million doses for 2023, based on a firm order for 4,000,000 doses. In the event of a firm order for 4,000,000 doses, Ceva will produce an additional 2,000,000 doses
at risk, which means that Ceva will produce such amount irrespective of any firm order for such amount by CFE.
at risk, which means that Ceva will produce such amount irrespective of any firm order for such amount by CFE.
By e-mail of 19 September 2022 (16:07 hrs), CFE confirmed as follows:
Dear [D],
I confirm that we will order 4 million doses Distemink for delivery 2023.
This e-mail was followed by Ceva’s e-mail of the same date (17:36 hrs):
Thank you for the confirmation.
4.10.
Ceva has argued that the above ordering process is not in line with the CMA, as Article 6.17 of the CMA sets out that parties would enter into a separate Production Planning Agreement (PPA), which never happened. At some point in time in 2020 a draft PPA was provided to CFE, but CFE did not respond to this draft PPA until 11 July 2022, when CFE commented on the draft with some minor amendments. The Court finds that conclusion of the PPA is not a condition precedent to any deliveries of Distemink to CFE, nor is the use of formal Purchase Orders, as Article 6.1 of the CMA seems to imply. According to the Court the sequence of correspondence between CFE and CEVA, as shown in para. 4.9 above, constitutes a firm and binding obligation on the part of CFE to purchase and take delivery of 4,000,000 ml of Distemink in 2023 and on the part of Ceva to produce 6,000,000 ml of Distemink, to deliver to CFE 4,000,000 ml and to keep 2,000,000 ml in stock for possible future purchase orders by CFE.
4.11
So far, Ceva has delivered 1,051,500 doses of Distemink to CFE in 2023. This implies that Ceva is either 2,948,500 or 4,948,500 doses short in delivery, depending on whether or not CFE increased its original firm order for 4,000,000 doses to 6,000,000 doses. As will be shown below, this discussion is not relevant for the discussion in these summary proceedings.
4.12.
It is not for the Court in these summary proceedings to decide on any legal consequences the shortage in delivery and/or the late delivery of any number of doses of Distemink may have for the parties. That is for the court in proceedings between the parties to decide on the merits of any and all claims that the parties may assert against each other. In these summary proceedings the scope of the dispute is limited to whether Ceva should be ordered to deliver any remaining doses of Distemink in 2023 and whether Ceva should be ordered to confirm its obligations to deliver any doses of Distemink in 2024.
4.13.
Ceva has argued that a number of factors prevent the delivery of any further doses of Distemink to CFE during this year and possibly also during next year. These factors include, but are not limited to, shortage of qualified personnel at the Verona Facility, unavailability of certain raw materials and semi-finished products for Distemink, production problems and legal and regulatory issues. In this regard, Ceva has also pointed out that Distemink vaccines have never before been produced at the Verona Facility. Distemink was produced in the former production facility in Fitchburg and the financial problems at Verona arose before the production of Distemink commenced at that location. As a consequence, Ceva cannot be held liable for any production issues arising at the Verona Facility.
4.14.
The above arguments by Ceva are in sharp contrast with the firm and unconditional commitments made by Ceva in its e-mail to CFE of 15 September 2022, in which Ceva wrote:
I confirm that Ceva Verona can produce 6 million doses of Distemink for 2023.It is fair to assume that Ceva, before sending this e-mail to CFE, ascertained itself that no factors preventing the production of Distemink existed at the time and that if such factors had existed, Ceva would have attached certain provisions to its commitment to produce and deliver the amount of Distemink doses ordered by CFE. Clearly, Ceva did not attach any provisions to its commitment at that time.
I confirm that Ceva Verona can produce 6 million doses of Distemink for 2023.It is fair to assume that Ceva, before sending this e-mail to CFE, ascertained itself that no factors preventing the production of Distemink existed at the time and that if such factors had existed, Ceva would have attached certain provisions to its commitment to produce and deliver the amount of Distemink doses ordered by CFE. Clearly, Ceva did not attach any provisions to its commitment at that time.
4.15.
This being as it is, in these proceedings CFE requests the Court to order the actual delivery of doses of Distemink. However, any order by the Court that is not actually feasible will not have any effect and will become especially cumbersome in the event the Court were to attach a penalty to any failure to comply with such court order. In other words, the Court cannot order a party to fulfil an obligation it cannot actually or physically execute. In this regard, the Court is sufficiently convinced on the basis of all the arguments put forward by Ceva that an order to compel Ceva to deliver another 2,948,500 ml or even 4,948,500 ml of Distemink during the remainder of this year is unrealistic and hence any request therefor by CFE should be rejected. Again, whether any failure to deliver any doses Distemink by Ceva should have legal consequences is for the Court in proceedings on the merits to decide.
4.16.
In addition, the Court is not convinced that 2,948,500 or even 4,948,500 doses of Distemink are absolutely required at this point in time. As discussed above, the present mink population is largely unprotected against the diseases that Distemink would prevent and that would only change after some time after being vaccinated. Supposing that Ceva were to be ordered to deliver a certain amount of vaccines after a Court Order, and assuming that Ceva could actually produce and deliver such vaccines within the timeframe set by the court order, the vaccines would likely not be administered to the present mink population before the beginning of December 2023 at the earliest. During the hearing CFE made it clear that the present mink population, except for the females that will be inseminated for the next generation, will be put to death somewhere during December or next January. This makes, in the opinion of the Court, that CFE’s request to order Ceva to deliver another 4,948,500 ml of Distemink during this year should be largely dismissed.
4.17.
Also during the hearing, CFE made it clear, and Ceva did not challenge this, that the female minks that are to be inseminated during next January should be vaccinated in order to be able to pass on their immunity to their progeny. Hence, also from an animal health point of view, timely vaccination of female minks is essential. During the hearing, CFE explained that some 1,500,000 female minks are to be vaccinated during next January. This is a number of doses that the Court considers a realistic number that Ceva should be able to produce, also given the fact that so far in 2023, Ceva has delivered some 1 million doses to CFE, which proves that production of Distemink is not altogether impossible.
4.18.
The legal basis for CFE’s claims is the CMA, in combination with the confirmation made by Ceva in its e-mail of 15 September 2022 that it will produce 6,000,000 ml of Distemink. To the extent that Ceva has argued that circumstances beyond its control, such as personnel shortages, production problems and regulatory issues, prevent the production of Distemink in large quantities, the Court is of the opinion that any and all such circumstances are within the realm of risk of Ceva, as they all concern factors for which Ceva is accountable under the CMA. What CFE in fact claims is performance of Ceva’s obligations under the CMA. That is an interest that CFE may pursue in these summary proceedings and that can be awarded by way of an interim measure as defined in Article 254 of the DCCP.
4.19.
On the merits of the foregoing, the Court will order Ceva to deliver 1,500,000 ml of Distemink to CFE by 15 December 2023, which should allow sufficient time to distribute the doses of Distemink to CFE’s customers and to timely vaccinate female minks during next January. A number of 1,500,000 doses of Distemink and the timeframe until 15 December 2023 should be sufficiently limited in number and long in time respectively, to allow Ceva to overcome its production limiting factors by maximising all its available resources.
4.20.
In order to underline the importance of the timely availability of 1,500,000 doses of Distemink for Ceva, the Court will attach a penalty of EUR 10,000,-- for each day that Ceva fails to comply with the Court’s order, as given in this judgment, as from 15 December 2023, provided this judgment will have been served on Ceva within 14 days of today, with a maximum of EUR 300,000,--.
4.21.
The request to order Ceva to confirm that a certain number of doses of Distemink will be supplied to CFE during 2024 against a certain price will be dismissed. This claim has the character of a declaratory judgment for which there is no room in summary proceedings. In the event that CFE is of the opinion that it is entitled to certain rights against Ceva on the basis of which it should receive a certain number of doses of Distemink against a certain price in 2024, CFE should follow standard court procedures and initiate proceedings against Ceva, if CFE feels that Ceva does not comply with any future contractual obligations.
Costs
4.22.
As the requests of CFE in these summary proceedings will only be partially awarded, the Court will order that both parties will bear their own legal costs and expenses in connection with these proceedings.
5.Conclusion
THE COURT IN SUMMARY PROCEEDINGS
5.1
Orders Ceva to deliver to CFE, or at least to ensure that Biomune delivers to CFE, 1,500,000 ml Distemink no later than by 15 December 2023, provided that this judgment will have been served on Ceva within fourteen (14) days of today, under penalty of a payment of EUR 10,000.-- for each day or part thereof that Ceva fails to comply with the aforementioned obligation, with a maximum of EUR 300,000,--.
5.2.
Declares that so far this judgment is enforceable notwithstanding appeal.
5.3.
Orders that each party will bear its own legal costs and expenses in connection with these summary proceedings.
5.4.
Dismisses all other claims.
Done by C.W.D. Bom, Judge, assisted by A. Tsjapanova, Clerk of the Court.
Issued in public on 2 October 2023.
APPROVED FOR DISTRIBUTION IN eNCC
SIGNATURE PAGE 1 OF 2
Judge
SIGNATURE PAGE 2 OF 2
Clerk of the Court