## Facts

- Electromedics, Inc., a medical-device company, became the target of competing acquisition efforts by St. Jude Medical, Inc. and Medtronic, Inc.
- Medtronic began acquiring Electromedics stock in 1993 and made an unsolicited merger proposal that Electromedics rejected.
- Electromedics retained an investment bank and decided to conduct an auction process to secure the best price for shareholders.
- St. Jude, assisted by its investment bank, entered the bidding process and conditioned serious negotiations on exclusivity and a termination fee in the event the deal did not close.
- Electromedics and St. Jude executed a merger agreement containing a $3 million termination fee payable to St. Jude if the transaction failed to close under specified circumstances.
- After the agreement, Medtronic increased its bid; St. Jude matched; Medtronic increased again; Electromedics accepted Medtronic’s higher offer.
- No termination fee was paid to St. Jude, and St. Jude sued Medtronic seeking to recover the $3 million fee and asserting unjust enrichment and tortious interference with contract.

## Issues

1. Whether the $3 million termination-fee provision in the St. Jude–Electromedics merger agreement was enforceable as a contractual term or void as an unenforceable penalty under liquidated-damages doctrine.
2. Whether Medtronic was liable for unjust enrichment based on benefits allegedly derived from St. Jude’s participation in the process and the ensuing transaction.
3. Whether Medtronic tortiously interfered with St. Jude’s contract with Electromedics by inducing breach or termination through its competing bid.

## Decision

- The court reversed summary judgment for Medtronic on the termination-fee claim and directed entry of judgment for St. Jude on that contractual claim.
- The court affirmed dismissal of St. Jude’s unjust enrichment claim.
- The court affirmed dismissal of St. Jude’s tortious interference with contract claim.

## Legal Principles

- A negotiated merger termination fee may be enforced as part of the parties’ bargained-for exchange and risk allocation, rather than analyzed as liquidated damages, where it functions as consideration supporting the transaction structure.
- A termination fee tied to an acquisition auction can be treated as compensation for an initial bidder’s costs and exposure and as a mechanism that may facilitate value-maximizing bidding, rather than as punishment for breach.
- Unjust enrichment is generally unavailable where an express contract governs the relevant relationship and provides a defined remedy.
- A competitor in a bidding contest is privileged to pursue the transaction through lawful competition; absent wrongful means, outbidding and displacement of a rival’s contract position does not establish tortious interference.

## Conclusion

The court held that the $3 million termination fee in the merger agreement was an enforceable contractual provision reflecting an arms-length allocation of risk in a competitive sale process, but it rejected St. Jude’s quasi-contract and tort theories because the dispute was governed by contract and Medtronic’s conduct amounted to lawful competitive bidding.


St. Jude Med., Inc. v. Medtronic, Inc., 536 N.W.2d 24 (Minn. Ct. App. 1995)