Elutia Inc. v. Medtronic Sofamor Danek USA, Inc.

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

ELUTIA INC., )
)
Plaintiff/Counterclaim )
Defendant, )
)
v. ) C.A. No. N24C-06-071 PAW CCLD
)
MEDTRONIC SOFAMOR )
DANEK USA, INC., )
)
Defendant/Counterclaim )
Plaintiff. )

Submitted: January 9, 2025
Decided: April 8, 2025

Upon Medtronic Sofamor Danek USA, Inc’s Motion to Dismiss;

GRANTED, in part and DENIED, in part.

MEMORANDUM OPINION AND ORDER

John M. Seaman, Esq.; and Florentina D. Field, Esq., of Abrams & Bayliss, LLP,
Evan S. Nadel, Esq.; and Bradley A. Roehrenbeck, Esq., of Kilpatrick, Townsend
and Stockton, LLP, Attorneys for Plaintiff/Counterclaim Defendant Elutia, Inc.

Todd C. Schiltz, Esq.; Angela Lam, Esq.; and Paul Wolfla, Esq., of Faegre Drinker
Biddle & Reath LLP, Attorneys for Defendant/Counterclaim Plaintiff Medtronic
Sofamor Danek USA, Inc.

WINSTON, J.
I. INTRODUCTION

Plaintiff Elutia Inc. and Defendant Medtronic Sofamor Danek USA, Inc.

entered into a Tissue Product Supply Agreement (the “Supply Agreement”).1 The

Supply Agreement details a business arrangement by which Elutia would sell a

viable bone matrix product (“FiberCel”) to Medtronic who would then distribute it

to customers.2 Elutia alleges Medtronic breached the Supply Agreement through

two, independent courses of conduct.3 First, Elutia claims Medtronic breached

Section 5.3 by failing to obtain and maintain general commercial liability insurance.4

Second, Elutia argues Medtronic breached Section 2.10 by failing to indemnify and

defend underlying FiberCel-related lawsuits (the “FiberCel Lawsuits”).5

Medtronic seeks dismissal of Elutia’s claims pursuant to Delaware Superior

Court Civil Rule 12(b)(6) (the “Motion”).6 Medtronic argues Elutia’s Section 5.3

claim is time-barred7 and the Section 2.10 claim fails as a matter of law.8 For the

1
See Amended Complaint for Damages (hereafter “Compl.”) ¶¶ 1-2, 6.
2
Id. ¶¶ 8-11.
3
See id. ¶¶ 41-54.
4
Id. ¶¶ 41-45; see Compl., Ex. A (hereafter “Agreement”) § 5.3.
5
Compl. ¶¶ 46-54; see Agreement § 2.10.
6
Def.’s Op. Br. in Supp. of its Mot. to Dismiss Am. Compl. (hereinafter “Op. Br.”)
at 1-4, 12-13.
7
See id. at 28-30.
8
See id. at 14-27.

2
reasons discussed below, Medtronic’s Motion is GRANTED, in part and DENIED,

in part.

II. FACTUAL AND PROCEDURAL BACKGROUND9

A. THE PARTIES AND THE SUPPLY AGREEMENT

Elutia develops “biologic products utilized to improve compatibility between

medical devices and [] patients.”10 On January 24, 2019, the parties entered into the

Supply Agreement by which Elutia agreed to supply Medtronic with FiberCel.11

Medtronic would then distribute FiberCel “to customers, third parties, and/or end

users.”12

Section 2.10 of the Supply Agreement establishes Medtronic’s obligation to

defend and indemnify Elutia in certain circumstances.13 Relevant here are three

separate bases for indemnification, which read:

[1] Medtronic will, at its own expense, defend any third party suit
instituted against Supplier that is based on (a) an allegation that any
Product was the cause of any personal injury or damage to property
[(the “Defense Provision”).] . . . [2] Medtronic will indemnify Supplier
against any award of damage and costs made against Supplier by a final
judgment of a court of last resort with respect to all such suits, provided

9
The facts cited are drawn from Elutia’s Amended Complaint and the documents
incorporated therein. The Court accepts as true the well-pled facts in the Amended
Complaint solely for the purpose of its decision on Medtronic’s Motion.
10
Compl. ¶ 6.
11
Id. ¶¶ 8, 10-11.
12
Id. ¶ 10.
13
Agreement § 2.10.

3
that Supplier gives Medtronic prompt notice in writing of all subject
claims, permits Medtronic through Medtronic’s counsel to defend the
same, and gives Medtronic all available information, assistance, and
authority to enable Medtronic to assume such defense [(the “Damages
Award Provision”)]. . . . [3] Medtronic further agrees to indemnify,
defend, and hold harmless [Elutia] against and in respect of any and all
Losses . . . in each case with respect to a third party claim, arising out
of or based upon the material breach by Medtronic of any of its
representations, warranties, covenants, or agreements contained or
incorporated in this Agreement or the Quality Agreement, except to the
extent such Losses . . . [are] caused by Suppliers breach of any of its
representations, warranties, covenants, or agreements contained or
incorporated in this Agreement or the Quality Agreement. Supplier
shall give Medtronic prompt notice in writing of all subject claims,
permit Medtronic through Medtronic’s counsel to defend the same, and
give Medtronic all available information, assistance, and authority to
enable Medtronic to assume such defense [(the “Loss Provision”)].14
“Losses” are defined as “any and all losses, obligations, liabilities, damages,

deficiencies, actions, settlements, judgments, costs, and expenses.”15 The Loss

Provision references the parties’ contractual representations and warranties, several

of which are relevant here. Specifically, the Amended Complaint16 cites

14
Id.
15
Id. § 2.9.
16
Compl. ¶ 19.

4
Medtronic’s representations in Sections 2.1.2.1,17 2.1.2.1.1,18 2.1.2.1.3,19 2.1.2.1.5,20

and 2.1.2.2,21 while the parties’ briefing references Elutia’s representations in

Sections 2.6,22 4.1.1,23 and 5.1.5.24

17
“Medtronic will promote, market, and transfer the Products to the Territory.
Medtronic will not misrepresent the origin of the Products, including in any way that
would cause one to believe that the Products are manufactured or developed by
anyone other than [Elutia]. Medtronic will distribute the Products to the Territory
together with all warnings and instructions necessary for the proper use of the
Products and will not make any warranty, express or implied, on behalf of [Elutia].”
Agreement § 2.1.2.1.
18
Medtronic will “not engage in any fraudulent, deceptive, misleading or unethical
conduct, including in the advertisement or promotion of the Products.” Agreement
§ 2.1.2.1.1.
19
Medtronic will “make no representations, warranties or guarantees to third parties
with respect to the Specifications, features or capabilities of the Products that are
false or misleading or are inconsistent with any representations, warranties or
guaranties regarding the Products that are expressly authorized by [Elutia].”
Agreement § 2.1.2.1.3.
20
Medtronic will ensure its “personnel have a sufficient level of understanding of
the Products to provide basic technical information to the potential Customers and
to effectively distribute and support the Products.” Agreement § 2.1.2.1.5.
21
“Medtronic will comply with all Applicable Laws in its distribution of the Products
and the performance of its obligations under this Agreement. . . . Medtronic will not
engage in any course or conduct that, in Supplier’s reasonable belief, would cause
[Elutia] to be in violation of the Applicable Laws of any jurisdiction. Medtronic will
promptly notify [Elutia] upon becoming aware that the Products or any requirements
of this Agreement may be in violation of any Applicable Laws.” Agreement §
2.1.2.2.
22
Elutia “warrants that the Products sold hereunder will be free from defects of
material and workmanship and will conform to the Specifications and that [Elutia]
will comply with all Applicable Law in regards to the services and products [Elutia]
is providing herein.” Agreement § 2.6.

5
The Supply Agreement also details the parties’ obligation to secure and

maintain insurance coverage.25 Specifically, Section 5.3 states:

Each party shall secure and maintain in full force and effect through the term
of this Agreement commercial general liability insurance coverage of not less
than One Million Dollars (US$1,000,000.00) per claim, and Five Million
Dollars (US$5,000,000.00) in the aggregate. Before the First Product
Shipment Date, each party shall provide an insurance certificate to the other
party evidencing such insurance coverage.26

It is undisputed that Medtronic did not purchase insurance or provide an insurance

certificate but rather chose to self-insure.27 Conversely, Elutia obtained a compliant

insurance policy from Continental Casualty Company, as well as an excess insurance

policy.28

23
Elutia “shall establish and maintain a quality system which is appropriate for the
activities that Supplier is responsible under this Agreement and which is in
compliance with current American Association of Tissue Banks (“AATB”)
Standards for Tissue Banking, 21 CFR Part 1271.160 and all Applicable Laws.”
Agreement § 4.1.1.
24
Elutia “is a human tissue processor which is AATB accredited that maintains a
Quality Management System which is in compliance with 21 CFR Part 1721.150
and all Applicable Law.” Agreement § 5.1.5.
25
Agreement § 5.3.
26
Id.
27
Compl. ¶¶ 25-26.
28
Id. ¶ 2.

6
B. THE FIBERCEL LAWSUITS AND THE PARTIES’ DISPUTE

In June 2021, Elutia recalled a single lot of FiberCel containing 154 units.29

Elutia had supplied all 154 units to Medtronic, who distributed 136 units which were

implanted into 113 patients.30 Beginning in September 2021, patients that received

the recalled FiberCel brought over 100 FiberCel Lawsuits.31 These suits asserted a

variety of claims, and generally alleged patients were exposed to and contracted

tuberculosis, or suffered complications following implantation of the recalled

FiberCel.32 Medtronic and Elutia are co-defendants in many of the FiberCel

Lawsuits.33 As a defendant, “Medtronic received prompt written notice of each of

the FiberCel Lawsuits,” via service of process “shortly after the filing of each suit.”34

29
Id. ¶¶ 12, 15.
30
Id. ¶¶ 13-14.
31
Id. ¶ 15.
32
Id. ¶¶ 16, 18.
33
Id. ¶¶ 18-19, 36-37. The Amended Complaint references one suit, Aspinall v.
Aziyo Biologics, Inc., et al., C.A. No. N21C-09-065 DJB (the “Aspinall Compl.”),
which “alleged that the defendants—including Medtronic—‘failed to exercise
reasonable care in the designing, researching, manufacturing, marketing, supplying,
promoting, sale, testing, quality assurance, quality control and distribution of
FiberCel’ and ‘were negligent in the designing, researching, supplying,
manufacturing, promoting, packaging, distributing, testing, advertising, warning,
marketing and sale of FiberCel.’” Compl. ¶ 19.
34
Compl. ¶ 36.

7
As a named party in many of the FiberCel Lawsuits, Medtronic could defend

each suit through its selected counsel.35 After the initial FiberCel Lawsuit was filed,

Elutia’s insurer determined that Medtronic potentially qualified as an insured under

Elutia’s Policy.36 Accordingly, the parties agreed to be jointly represented by the

law firm Elutia’s insurer retained.37 Elutia informed Medtronic that Elutia reserved

its right to seek contribution or indemnification from Medtronic pursuant to Section

2.10 of the Agreement.38 As part of the joint defense, Elutia provided Medtronic

with information and assistance towards the defense of the suits,39 and regular

updates on all FiberCel Lawsuits, including the few actions in which Medtronic was

not a party.40 Elutia alleges, Medtronic had equal control over their joint defense.41

Both Elutia and Medtronic denied the plaintiffs’ allegations in the FiberCel

Lawsuits, none of which have resulted in a final judgment.42 Several FiberCel

Lawsuits, however, have settled.43 At present, Elutia’s insurers have expended over

35
Id. ¶ 37.
36
Id. ¶ 27 (internal quotation omitted).
37
Id. ¶¶ 28, 37.
38
Id.
39
Compl. ¶ 38.
40
Id. ¶ 36.
41
Id. ¶ 38.
42
Id. ¶¶ 20-21.
43
Id. ¶¶ 7, 30-32.

8
$17 million to defend and settle FiberCel Lawsuits on behalf of both Elutia and

Medtronic, with a significant portion attributable to the cost to defend and settle

claims in the FiberCel Lawsuits against Medtronic.44

Once Elutia realized it was nearing exhaustion of its insurance coverage

limits, it requested Medtronic contribute to defense costs and commit to future

indemnity.45 This prompted Medtronic to retain separate counsel in the FiberCel

Lawsuits.46 Elutia then filed this action.47 The parties also tolled the applicable

limitations periods on their respective legal claims.48

C. PROCEDURAL HISTORY

Elutia initiated this action on June 7, 2024. After Medtronic moved for

judgment on the pleadings, Elutia amended its complaint. In response, Medtronic

filed the instant Motion and Elutia opposed. After Medtronic filed its reply brief,

this Court heard oral argument and reserved its decision.

III. STANDARD OF REVIEW

On a Rule 12(b)(6) motion to dismiss, the Court: (i) accepts all well-pleaded

factual allegations as true; (ii) credits vague allegations if they give the opposing

44
Id. ¶ 30.
45
Id. ¶¶ 30-31, 37-40.
46
Id. ¶ 39.
47
Id.
48
Id.

9
party notice of the claim; (iii) draws all reasonable inferences for the non-moving

party; and (iv) denies dismissal if recovery on the claim is reasonably conceivable.49

The Court does not, however, accept conclusory allegations unsupported by the facts

or draw unreasonable inferences in favor of the nonmovant.50

IV. ANALYSIS

Elutia asserts two breach of contract claims against Medtronic.51 Count I

alleges “Breach of Contract – insurance Coverage Requirement” based on Section

5.3.52 Count II alleges “Breach of Contract – Failure to Indemnify” based on Section

2.10.53 Medtronic seeks dismissal of both counts under Rule 12(b)(6). For a breach

of contract claim to survive a motion to dismiss, “the plaintiff must demonstrate:

first, the existence of the contract, whether express or implied; second, the breach of

an obligation imposed by that contract; and third, the resultant damage to the

plaintiff.”54 Dismissal of a claim “based on contract interpretation is proper ‘if the

49
Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Holdings, LLC, 27 A.3d 531, 535
(Del. 2011).
50
Windsor I, LLC v. CWCapital Asset Mgmt. LLC, 238 A.3d 863, 871 (Del. 2020).
51
See generally Compl.
52
Id. ¶¶ 41-45.
53
Id. ¶¶ 46-54.
54
VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).

10
defendants’ interpretation is the only reasonable construction as a matter of law.’”55

The Court addresses each Count in turn.

A. COUNT I IS TIME-BARRED.

Section 5.3 requires each party to “secure and maintain . . . through the term

of this Agreement . . . insurance coverage of not less than One Million Dollars [] per

claim, and Five Million Dollars [] in the aggregate.”56 Additionally, both parties had

to “provide an insurance certificate to the other party evidencing such insurance

coverage,” before the first FiberCel shipment.57 Medtronic did not purchase

insurance or provide an insurance certificate.58 Thus, Medtronic’s sole argument

regarding Section 5.3, is that Elutia’s claim for breach of the insurance provision is

time-barred.59

55
Caspian Alpha Long Credit Fund, L.P. v. GS Mezzanine Partners 2006, L.P., 93
A.3d 1203, 1205 (Del. 2014) (quoting Vanderbilt Income & Growth Assocs., LLC v.
Arvida/JMB Managers, Inc., 691 A.2d 609, 613 (Del. 1996) (emphasis in original)).
56
Agreement § 5.3.
57
Id.
58
Compl. ¶¶ 25-26.
59
Op. Br. at 28-30. “A motion to dismiss is the proper vehicle for a statute of
limitations defense where the pleading itself demonstrates that the claim was brought
after the statutory period has run.” Adames v. Adames, 2020 WL 3027240, at *1 (Del.
Super. June 5, 2020) (citations omitted).

11
The statute of limitations for a breach of contract claim is three years.60 The

Supply Agreement became effective January 24, 2019.61 The parties executed a

tolling agreement on January 29, 2024, “to toll the applicable limitations period on

their respective legal claims.”62 Therefore, the question before the Court is when

Elutia’s cause of action under Section 5.3 arose.

Medtronic contends any cause of action under Section 5.3 arose in January

2019, when the Supply Agreement became effective.63 Because the Supply

Agreement “required Medtronic to procure insurance from the outset of the

contract,”64 any breach of Section 5.3 occurred “the moment the contract took

effect.”65 The Supply Agreement became effective in 2019, and the parties did not

enter the tolling agreement until 2024.66 Accordingly, Medtronic contends Count I

is time-barred.67

60
10 Del. C. § 8106(a).
61
Compl. ¶ 8.
62
Compl. ¶ 39; see Pl.’s Br. in Opp. to Def.’s Mot. to Dismiss Am. Compl.
(hereinafter “Ans. Br.”), Ex. 2.
63
Op. Br. at 28-30.
64
Id. at 28-29.
65
Id. at 29.
66
Id. at 29-30.
67
Id. at 29-30.

12
Elutia rejects Medtronic’s argument because the Supply Agreement’s

“insurance obligations are continuous in nature under Section 5.3’s plain terms.”68

Thus, under the “continuous breach doctrine, a new claim accrued every day that

Medtronic failed to comply with its insurance obligations.”69 Elutia contends the

continuous breach doctrine also applies because it could not have ascertained or

recovered damages from Medtronic’s failure when the Supply Agreement began.70

Because Elutia could not ascertain damages until the FiberCel Lawsuits were filed,

Elutia’s claim did not accrue until a date within the limitations period.71

Accordingly, Count I’s timeliness hinges on the continuing breach doctrine’s

applicability.

The continuing breach doctrine is a narrow exception which applies “only

when there is a continuing injury whose damages cannot be determined until the

cessation of the wrong.”72 Importantly, the doctrine does not apply “if the aggrieved

party could have alleged a prima facie case for breach of contract . . . after a single

68
Ans. Br. at 8-9.
69
Id. at 9-13.
70
Id. at 13-15.
71
Id. at 13-14.
72
Vivint Solar, Inc. v. Lundberg, 2024 WL 2755380, at *27 (Del. Ch. May 30, 2024)
(citations omitted), aff’d, 2025 WL 855020 (Del. Mar. 19, 2025).

13
incident.”73 This is true even if the aggrieved party alleges numerous repeated

wrongs of similar, if not the same, character over an extended period.74

Based on the continuing breach doctrine, Medtronic’s failure to obtain and

maintain insurance coverage is not a continuing breach. Elutia could have alleged a

prima facie case for breach of Section 5.3 on the Agreement’s effective date—

January 24, 2019—when Medtronic failed to secure insurance.75 Therefore, while

Section 5.3 imposed an ongoing obligation to maintain coverage, that alone does not

73
Id. at *27 (quoting AM Gen. Hldgs. LLC v. The Renco Gp., Inc., 2016 WL
4440476, at *12 (Del. Ch. Aug. 22, 2016)).
74
Id.
75
Compl. ¶ 25 (“Medtronic has admitted that it did not procure any potentially
applicable insurance policy at any time pursuant to the Supply Agreement[.]”).
Elutia makes a passing argument that its breach cause of action first arose when it
“shipped the products to Medtronic” because Medtronic never provided an insurance
certificate as required by Section 5.3. Def.’s Reply Br. in Supp. of its Mot. to
Dismiss Pl.’s Am. Compl. (hereinafter “Reply Br.”) at 17-18; see Compl. ¶ 26. That
argument, however, is inconsistent with both the Supply Agreement’s text and the
Amended Complaint’s allegations. Section 5.3 required Medtronic to “secure”
insurance coverage by the Supply Agreement’s effective date. Agreement § 5.3. As
discussed, Medtronic’s failure to obtain compliant insurance gave Elutia a prima
facie breach claim when the Supply Agreement became effective, independent of
any obligation to provide an insurance certificate. See Compl. ¶ 25 (“Medtronic has
admitted that it did not procure any potentially applicable insurance policy at any
time pursuant to the Supply Agreement[.]”). This comports with the Amended
Complaint’s allegations which specifically challenge Medtronic’s failure “to secure
and maintain in full force and effect through the term of the Supply Agreement
commercial general liability insurance[,]” not Medtronic’s non-provision of an
insurance certificate. Id. ¶ 44; see id. ¶¶ 41-45 (allegations concerning Elutia’s
Section 5.3 claim, which do not mention the insurance certificate). Accordingly,
Elutia’s insurance certificate argument does not alter the statute of limitations
analysis.

14
mandate application of the continuing breach doctrine.76 Moreover, contrary to

Elutia’s assertion,77 damages could be ascertained at the time of breach.78 Elutia

seeks “not less than five million dollars” for Medtronic’s alleged breach of the

insurance provision.79 That figure is drawn directly from Section 5.3’s minimum

aggregate insurance coverage.80 Hence, Elutia could have brought the same claim

seeking $5 million when the Supply Agreement became effective.81 Thus, the

continuing breach doctrine is inapplicable, and Count I is time-barred. Medtronic’s

Motion to Dismiss Count I is GRANTED.

76
Vivint Solar, 2024 WL 2755380, at *27.
77
Ans. Br. at 13-15.
78
Medtronic argues that whether Elutia could ascertain its damages is irrelevant
given the Supreme Court of Delaware’s recent holding that, “[a] breach-of-contract
claim ‘accrues and the Statute begins to run at the time the contract is broken, not at
the time when actual damage results or is ascertained.’” Lehman Brothers Holdings,
Inc. v. Kee, 268 A.3d 178, 185-86 (Del. 2021) (quoting Worrel v. Farmers Bank of
State, 430 A.2d 469, 472 (Del. 1981)). That decision did not address the continuing
breach doctrine, but recognized “the limitations period can be tolled in certain
circumstances.” Id. (internal quotations omitted). The Court need not address
Medtronic’s argument because Elutia could reasonably ascertain its damages when
its cause of action under Section 5.3 first accrued.
79
Compl. ¶ 45.
80
See id. ¶ 44; Agreement § 5.3.
81
Donald M. Durkin Contracting, Inc. v. City of Newark, 2020 WL 5797622, at *13
(Del. Super. Sept. 29, 2020) (“holding that “[p]laintiff could have brought the same
claim after the Defendant’s refusal that Plaintiff now raises in the instant case. As
such, the continuing claim or continuing breach doctrine is not applicable to
Plaintiff’s claim.”).

15
B. ELUTIA STATES A CLAIM FOR BREACH OF SECTION 2.10.

Section 2.10 of the Supply Agreement details Medtronic’s obligation to

defend and indemnify Elutia.82 Elutia asserts it is owed indemnification under three

separate clauses of Section 2.10—the Defense Provision, the Damages Award

Provision, and the Loss Provision.83 At the outset, Medtronic contends Count II fails

because the Amended Complaint does not allege that Elutia complied with Section

2.10’s three “conditions precedent.”84 Those conditions include:

(1) Elutia give Medtronic prompt written notice of each FiberCel
Lawsuit as to which it asserted indemnity rights, (2) Elutia permit
Medtronic, through Medtronic’s counsel, to defend the suit against
Elutia, and (3) Elutia provide Medtronic with all available information,
assistance and authority so Medtronic can assume (and perform) the
defense.85
Additionally, Medtronic argues Elutia fails to state a claim for breach of any part of

Section 2.10.86 The Court addresses each contention in turn.

82
Agreement § 2.10; see supra n.14 and accompanying text (providing the text of
the three relevant clauses of § 2.10).
83
See Compl. ¶¶ 33-35, 46-54.
84
Op. Br. at 22, 25.
85
Id. at 21 (citing Agreement § 2.10). A condition precedent is an “act or event,
other than a lapse of time, that must exist or occur before a duty to perform
something promised arises.” Thomas v. Headlands Tech Principal Holdings, L.P.,
2020 WL 5946962, at *5 (Del. Super. Sept. 22, 2020) (citations omitted).
Accordingly, any phrase that conditions performance suffices, to create a condition
precedent. Id. (citation omitted).
86
Op. Br. at 14-27.

16
1. THE COMPLAINT SUFFICIENTLY ALLEGES ELUTIA COMPLIED
WITH THE CONDITIONS PRECEDENT.
Medtronic argues its indemnification obligation was not triggered because

Elutia failed to comply with Section 2.10’s three conditions.87 Elutia responds

contending, among other things, it adequately alleged that all conditions have been

met.88 As explained above, the pleading standard governing a motion to dismiss is

minimal. At this stage, the Court will not consider whether the conditions were

performed as a matter of fact.89 Rather, the question is whether Elutia’s well-pleaded

Amended Complaint generally alleges compliance with the conditions precedent.90

Here, Elutia pled that it met all of its obligations under the Agreement.91 Thus, the

87
Op. Br. at 20-22. The Court notes that while indemnification under the Damages
Award Provision and Loss Provision is expressly tied to satisfaction of the
conditions, the Defense Provision contains no such textual requirement. Whether
Medtronic’s indemnification obligation under the Defense Provision is nevertheless
based on Elutia’s satisfaction of the conditions remains in dispute and is addressed
later in the memo. See infra, IV.B.2.
88
Ans. Br. at 26-31.
89
Cent. Mortg., 27 A.3d at 538.
90
Id. See also, Super. Ct. R. 9(c) (“In pleading the performance or occurrence of
conditions precedent, it is sufficient to aver generally that all conditions precent have
been performed or have occurred.”); Eisemann Corp. v. General Motors Corp., 2000
WL 140781, at *18 (Del. Super. Jan. 28, 2000) (denying defendant’s motion to
dismiss based on plaintiff’s failure to plead that specific conditions precedent were
satisfied because plaintiff alleged complete performance generally.).
91
Elutia generally alleges that it “has performed and continues to perform all
conditions, covenants, and promises required on its part to be performed in
accordance with the terms and conditions of the [] Agreement.” Compl. ¶ 48. The
Amended Complaint also contains allegations giving rise to a reasonable inference

17
Amended Complaint sufficiently alleges Elutia performed Section 2.10’s conditions

precedent, which is enough to survive a motion to dismiss.

2. ELUTIA STATES A CLAIM FOR BREACH OF SECTION 2.10’S
DEFENSE PROVISION.

The Court next addresses Medtronic’s contention that the Amended

Complaint fails to state a claim for breach of Section 2.10.’s Defense Provision.

Medtronic contends the conditions precedent apply to the Defense Provision.92

However, the Defense Provision does not set forth the conditions precedent. Instead,

they are listed in the following sentence—the Damages Award Provision. The

provisions at issue provide:

[1] Medtronic will, at its own expense, defend any third party suit
instituted against Supplier that is based on (a) an allegation that any
Product was the cause of any personal injury or damage to property
[Defense Provision] . . . [2] Medtronic will indemnify Supplier against

that Elutia complied with each individual condition precedent. Regarding the need
to provide notice, the Amended Complaint alleges “Medtronic received prompt
written notice of each of the FiberCel Lawsuits . . . as a [named] defendant in almost
all the FiberCel Lawsuits . . . [and] [j]oint defense counsel provided Medtronic with
regular updates on all FiberCel Lawsuits. Id. ¶ 36. Concerning the ability to choose
counsel and control the defense, the Amended Complaint alleges “Medtronic was
permitted the opportunity to defend each of the FiberCel Lawsuits through its chosen
counsel. Medtronic elected to be defended by the law firm of Bowman & Brooke
LLP, as did Elutia.” Id. ¶ 37. Finally, regarding Elutia’s obligation to assist
Medtronic in its defense of the FiberCel Lawsuits, the Amended Complaint alleges
“Elutia and Medtronic were jointly defended in the suits, and Elutia provided
Medtronic with all available information and assistance towards the defense of the
suits. Medtronic had equal control with Elutia over their joint defense of the FiberCel
Lawsuits.” Id. ¶ 38.
92
See Op. Br. at 20-21; Reply Br. at 4-7.

18
any award of damage and costs made against Supplier by a final
judgment of a court of last resort with respect to all such suits, provided
that Supplier gives Medtronic prompt notice in writing of all subject
claims, permits Medtronic through Medtronic’s counsel to defend the
same, and gives Medtronic all available information, assistance, and
authority to enable Medtronic to assume such defense [Damages Award
Provision].

Medtronic contends these provisions make clear that Elutia must satisfy the

conditions in the second sentence to trigger Medtronic’s defense duties for the type

of claim described in the first sentence.93 Specifically, the only reasonable

interpretation of the two sentences is that “all such suits” in the second sentence must

refer back to “third party suit” in the first sentence.94 Elutia argues that reading the

two sentences together adds atextual requirements to the Defense Provision.95 In

support of its position, Elutia notes only the Damages Award Provision and Loss

Provision expressly include conditions precedent, the Defense Provision does not.96

Although contractual interpretation is a question of law and suitable for

determination on a motion to dismiss, the Court cannot choose between two differing

reasonable interpretations of ambiguous provisions.97 Dismissal is only proper if

93
Reply Br. at 5.
94
Id.
95
Ans. Br. at 17.
96
Id.
97
VLIW Tech., 840 A.2d at 615 (opining that on a motion to dismiss, a court cannot
choose between reasonable interpretations).

19
Medtronic’s interpretation is the only reasonable interpretation.98 Here, both

interpretations are reasonable; therefore, it is premature for the Court to decide

whether the conditions precedent apply to the Defense Provision. Separately, and in

addition, even if Medtronic’s interpretation was the only reasonable construction,

dismissal would be unwarranted because Elutia sufficiently pled compliance with its

contractual obligations.99 Accordingly, the Motion is DENIED regarding the

Defense Provision portion of Count II.

3. ELUTIA DOES NOT STATE A CLAIM FOR BREACH OF SECTION
2.10’S DAMAGES AWARD PROVISION.
Turning to the Damages Provision, Medtronic contends the plain text

“obligates Medtronic to indemnify Elutia not for settlements but for awards of

damages and costs issued by a court of last resort.”100 While the Amended

Complaint seeks indemnity “against the . . . judgments in the underlying” suits,101

Medtronic contends that request fails because there have been no final judgments in

any of the FiberCel Lawsuits.102

98
Caspian Alpha, 93 A.3d at 1205.
99
See supra, IV.B.1.
100
Op. Br. at 15.
101
Compl. ¶ 7.
102
Op. Br. at 18-19 (citing Compl. ¶ 21).

20
Elutia does not dispute the lack of any final judgments in the FiberCel

Lawsuits.103 Instead, Elutia argues the absence of judgments against it does not

abrogate Medtronic’s breach of the Damages Award Provision, because Medtronic’s

repudiation of its indemnification obligations is a breach.104 Elutia maintains the

Amended Complaint alleges Medtronic repeatedly repudiated its indemnification

obligations, which constitutes breach.105 That position, however, is factually

untethered.

To sustain an anticipatory repudiation breach claim, a complaint must allege

the promisor gave an unequivocal, positive, and unconditional statement about the

promisor’s intent not to perform the contractual obligation.106 The Amended

Complaint does not use the word “repudiate,” or contain any allegation that

Medtronic told Elutia it would never indemnify pursuant to the Damages Award

Provision.107 Similarly, at oral argument Elutia’s counsel was unable to point to any

fact in the Amended Complaint demonstrating that Medtronic stated it would never

103
Ans. Br. at 19-22.
104
Ans. Br. at 19-20.
105
Id. at 21-22 (citing Compl. ¶ 40). “Elutia has made numerous requests to
Medtronic to honor the terms of the Medtronic Indemnity and contribute to the costs
of defending the FiberCel Lawsuits. . . . To date, however, Medtronic has failed and
refused to honor its indemnity obligations.” Compl. ¶ 40.
106
Veloric v. J.G. Wentworth, Inc., 2014 WL 4639217, at *15 (Del. Ch. Sept. 18,
2014) (citations omitted).
107
See generally Compl.

21
perform under the Damages Award Provision. The closest the Amended Complaint

comes to alleging anticipatory repudiation is its allegation that, “Medtronic has

failed and refused to honor its indemnity obligations.”108 Yet, the parties’

correspondence demonstrates that when Elutia made its indemnification request,109

Medtronic did not refuse to indemnify under any circumstance.110 Instead,

Medtronic asserted Elutia failed to satisfy conditions precedent to Medtronic’s duty

to defend and Elutia was not entitled to indemnification under Delaware law.111

Contrary to Elutia’s contention, Medtronic was pointing out that the triggering

events that could give rise to a duty to indemnify had not occurred. Thus, the

Amended Complaint’s allegations do not create a reasonable inference that

Medtronic anticipatorily repudiated its obligations to indemnify under the Supply

108
Id. ¶ 40.
109
See Def.’s Answer and Defenses to Pl.’s Compl. and Counterclaim (hereafter
“Counterclaim”), Ex. 3 (showing the October 25, 2023, email in which Elutia
requested indemnification for the FiberCel Lawsuits from Medtronic). See also
Furman v. Delaware Dept. of Trans., 30 A.3d 771, 774 (Del. 2011) (holding that on
a motion to dismiss, the Court may consider documents incorporated by reference
that are integral to a plaintiff’s claim). The exhibits to the Counterclaim are integral
to Elutia’s claim and referenced in the Amended Complaint. See Compl. ¶ 40
(“Elutia has made numerous requests to Medtronic to honor the terms of the
Medtronic Indemnity . . . .”).
110
See Counterclaim, Ex. 4.
111
Id. at 1 (emphasis added).

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Agreement. The Motion regarding the Damages Provision portion of Count II is

GRANTED.

4. ELUTIA STATES A CLAIM FOR BREACH OF SECTION 2.10’S LOSS
PROVISION.

The Motion’s final argument is that the Amended Complaint fails to state a

claim for breach of the Loss Provision.112 Given the nuance of the parties’ arguments

concerning the Loss Provision, the Court first outlines their positions before

addressing the merits.

a. THE PARTIES’ ARGUMENTS
Medtronic concedes that the Loss Provision requires it to indemnify Elutia for

settlement costs in some instances.113 That indemnity obligation only applies to

settlements that resolve a third-party claim against Elutia that arises out of or is based

upon a material breach by Medtronic of any of its representations contained or

incorporated in the Supply Agreement.114 Medtronic argues the Amended Complaint

“fail[s] to connect any claim against [Elutia] in the FiberCel Lawsuits to an alleged

material breach of a Medtronic Supply Agreement representation.”115 Medtronic

maintains the representations Elutia cites in the Amended Complaint, do not cover

112
Op. Br. at 15-27.
113
Id. at 15; see Agreement §§ 2.9 (providing the definition of “Losses”), 2.10.
114
Op. Br. at 15 (quoting Agreement § 2.10).
115
Id. at 16.

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the acts challenged in the FiberCel Lawsuits—that FiberCel was contaminated with

tuberculosis and unsafe.116 Additionally, Medtronic argues public policy supports

the position that no indemnification is owed under Section 2.10, as Elutia’s losses

arise from its own wrongful acts.117 Because “no language in Section 2.10 clearly

and unequivocally states that negligence or fault-based claims against Elutia are

indemnifiable,” Medtronic argues the Court should not interpret the Loss Provision

to insulate Elutia from its own negligence.118

Elutia posits that “allegations and arguments in the FiberCel Lawsuits, if true,

would constitute a material breach of Medtronic’s representations . . . in the Supply

Agreement.”119 Elutia cites the Aspinall complaint as demonstrating that Medtronic

was more than a mere distributor without other involvement, in the wrongful conduct

challenged by the FiberCel Lawsuits.120 Elutia’s brief maps the actions challenged

in Aspinall, onto Medtronic’s contractual representations.121 Elutia also reject’s

Medtronic’s public policy argument.122 First, Elutia notes the FiberCel Lawsuits

116
Id. at 16-17.
117
Id. at 25-27.
118
Id. at 26.
119
Compl. ¶ 19; see also, Ans. Br. at 23.
120
Ans. Br. at 23-26 (citing Aspinall Compl. ¶¶ 38, 40, 53).
121
Id. at 25-26.
122
Id. at 31-35.

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named both Elutia and Medtronic as defendants, hence the argument that only

Elutia’s actions were at issue is incorrect.123 Second, Elutia notes none of the

FiberCel Lawsuits resulted in a finding that Elutia was negligent, so Medtronic’s

position is factually attenuated.124 Finally, Elutia maintains that even if the

indemnity obligations arose out of Elutia’s wrongful conduct, Medtronic must

indemnify Elutia because Section 2.10’s plain text shows the parties intended such

a result.125

b. THE COURT’S ANALYSIS

As the parties’ briefing makes clear, whether Elutia states a claim for breach

of the Loss Provision depends on resolution of two questions. First, does the

Amended Complaint allege the FiberCel Lawsuits challenged actions which

implicate Medtronic’s representations in the Supply Agreement. Second, if Elutia

has an indemnification claim, should the Court nevertheless abrogate that

contractual right on public policy grounds.

To the first question, the Amended Complaint references specific Medtronic

representations Elutia alleges would be breached, if the FiberCel Lawsuits’

123
Id. at 31-32.
124
Id. at 33 (citing Compl. ¶¶ 20-21).
125
Id. at 33-35.

25
contentions are true.126 While there are “over 100” FiberCel Lawsuits, the parties

only attached the Aspinall complaint to the pleadings. Accordingly, there appears to

be at least a factual question, unsuited for resolution on a motion to dismiss,

regarding whether the other FiberCel Lawsuits challenged actions that would breach

Medtronic’s representations.127 Considering the Aspinall complaint alone,

Medtronic has not demonstrated the only plausible reading is that it challenges

actions outside Medtronic’s Supply Agreement representations. For example,

“Medtronic’s alleged negligence in distributing, advertising, warning, marketing and

sale of FiberCel,”128 could fall within Section 2.1.2.1.129 Accordingly, the Amended

Complaint alleges the FiberCel Lawsuits challenged Medtronic actions that, if true,

would breach Medtronic’s representations in the Supply Agreement. Thus, the

portion of Count II dealing with the Loss Provision is not excludable on that basis.

To the second relevant question, Medtronic is correct that contracts relieving

a party of its own negligence are disfavored.130 “While a contract for

126
Compl. ¶ 19.
127
While the Amended Complaint alleges the FiberCel Lawsuit made the same
general allegations, it also notes they were filed in multiple courts and asserted
different causes of action. Compl. ¶¶ 16-18.
128
Ans. Br. at 25 (citing Aspinall Compl. ¶¶ 38, 53).
129
See Agreement § 2.1.2.1 (requiring Medtronic to distribute FiberCel “together
with all warnings and instructions necessary for the proper use.”).
Waller v. J. E. Brenneman Co., 307 A.2d 550, 551-52 (Del. Super. 1973) (citation
130

omitted)).

26
indemnification may provide for indemnification for the indemnitee’s own

negligence, that intention must be evidenced by unequivocal language.”131 Without

a “crystal clear and unequivocal” statement that an indemnification provision is

intended to insulate a party from its own negligence, the Court will not interpret it

as such.132 Section 2.10 does not meet that standard. Indeed, the text suggests the

opposite. The Loss Provision limits Medtronic’s indemnity obligation “to the extent

[] Losses are due to [Elutia’s] gross negligence or intentional misconduct or to the

extent caused by [Elutia’s] breach of any of its representations” in the Supply

Agreement.133 Thus, Section 2.10 does not require Medtronic to indemnify Elutia’s

own misconduct.

That fact, however, does not mandate granting Medtronic’s Motion. The

Amended Complaint alleges the FiberCel Lawsuits challenged some conduct

attributable to Medtronic. If those allegations prove true, a portion of Elutia’s Loss

would not be based on its own actions. Thus, that Section 2.10 prohibits Elutia from

recovering for its own wrongful conduct, does not bar its claims. Accordingly,

131
American Ins. Group v. Risk Enterprise Management, Ltd., 761 A.2d 826, 829
(Del. 2000).
132
Clemmons v. Whiting-Turner Contracting Co., 2000 WL 33113924, at *2 (Del.
Super. Oct. 31, 2000) (citing Jordan v. State v. Interstate Amiesite Corp., 297 A.2d
41, 44-45 (Del. 1972)).
133
Agreement § 2.10.

27
public policy does not provide a basis for dismissing Count II. The Court DENIES

the Motion regarding the Loss Provision portion of Count II.

V. CONCLUSION

For the foregoing reasons, Medtronic’s Motion to Dismiss is GRANTED, in

part and DENIED, in part.

IT IS SO ORDERED.

/s/ Patricia A. Winston
Patricia A. Winston, Judge

28