Revitalyte LLC v. PBM Nutritionals, LLC

Background

Revitalyte sells oral electrolyte solution products. In September 2020, it entered a supply agreement with PBM for approximately $4 million worth of products. The agreement required PBM to indemnify, defend, and hold Revitalyte harmless from third-party claims arising from PBM’s products or conduct, including certain intellectual-property claims. But the agreement stated that PBM’s indemnification obligation did not apply to claims involving Revitalyte’s negligence or willful misconduct.

In May 2023, Abbott sued Revitalyte in a separate, ongoing case. Abbott asserted claims involving trade-dress infringement, trademark infringement, unfair competition, false advertising, dilution, and deceptive trade practices. The claims included allegations that Revitalyte acted willfully. Revitalyte notified PBM of the lawsuit and requested indemnification and a defense. PBM declined.

Revitalyte then sued PBM. Counts 1 and 2 alleged that PBM breached contractual duties to defend, indemnify, and hold Revitalyte harmless. PBM moved for judgment on the pleadings as to those counts and argued that the agreement’s willful-misconduct exception barred them.

Legal standard

A motion for judgment on the pleadings may be granted when there is no dispute about any material fact and the moving party is entitled to judgment as a matter of law. The court evaluated the motion under the same standard used for a motion to dismiss for failure to state a claim. The court accepted well-pleaded factual allegations as true and viewed reasonable inferences in Revitalyte’s favor, but it did not accept conclusory allegations or legal conclusions as facts.

Because the parties agreed that the supply agreement was valid, the court treated the dispute as one of contract interpretation. The agreement selected Michigan law. Under Michigan law, clear contract language is enforced according to its ordinary meaning, and the contract is read so that each word and provision has effect.

Court’s analysis

The court first held that an allegation of willful misconduct was enough to trigger the exception. The agreement excluded claims, suits, actions, losses, liabilities, judgments, costs, or expenses that “involve” Revitalyte’s willful misconduct. The court found that the words “any” and “involves” were broad and that an allegation of willfulness qualifies, even if the allegation has not yet been proven and even if the underlying claim ultimately fails.

The court applied that interpretation to Abbott’s lawsuit. Because Abbott’s claims required assessment of whether Revitalyte acted willfully, the lawsuit involved willful misconduct under the agreement. The court therefore held that PBM had no responsibility to indemnify Revitalyte in the Abbott lawsuit and dismissed Count 2.

The court separately considered whether the exception also eliminated PBM’s duty to defend. It concluded that the agreement treated the duties to indemnify, defend, and hold harmless as one combined obligation. The phrase “this indemnification obligation,” appearing immediately after those duties, referred to the entire preceding obligation. The court therefore held that the willful-misconduct exception applied to the duty to defend as well as to indemnification and the duty to hold harmless.

Disposition

Judge Donovan W. Frank granted PBM Nutritionals, LLC’s motion for judgment on the pleadings. The court dismissed Counts 1 and 2 of Revitalyte LLC’s amended complaint with prejudice. The court concluded that PBM was not required to indemnify, defend, or hold Revitalyte harmless in the Abbott lawsuit.