PATRICIA A. SEITZ, District Judge.
This matter is before the Court on Defendant Biotronik, Inc.'s Motion for Summary Judgment [DE-116] and Plaintiffs/Counter-Defendants' Motion for Summary Judgment as to Biotronik's Counterclaims [DE-123]. This case arises from a failed contractual business relationship between Plaintiffs JMA, Inc., J.A. LaPadula, Inc., Joseph LaPadula, and Scott Mathison (jointly, the Representatives) and Defendant. The Representatives were sales representatives for Defendant until the relationship fell apart, leading to a race to the courthouse. Plaintiffs won the race and now have a four-count Second Amended Complaint [DE-87]. Defendants filed a counterclaim [DE-92].
Plaintiffs' Seconded Amended Complaint alleges that Defendant breached the parties' agreements by participating in Biotronik GmbH's original equipment manufacturer (OEM) program, by wrongfully removing certain accounts from the Representatives' territory, by breaching the agreements' implied covenant of good faith and fair dealing, and by interfering with the Representatives' right or ability to perform under the agreements. Plaintiffs' declaratory relief claims seek declarations that: (1) the agreements were terminable at will and, as a result, LaPadula and Mathison did not breach the agreements and Plaintiff St. Jude Medical S.C., Inc. (SJM) did not tortiously interfere; (2) that Defendant terminated the agreements and thereby vitiated the need for LaPadula and Mathison to terminate prior to being hired by SJM and preventing SJM from tortiously interfering; and (3) the Representatives were entitled to terminate the agreements based on Defendant's breach of the agreements and, thus, the Representatives were not bound by any post-termination covenants and SJM could not have tortiously interfered.
Count I of Defendant's counterclaim alleges that the Representatives breached the agreements by violating their non-compete and non-solicitation obligations and the implied covenant of good faith and fair dealing. Count II alleges that SJM tortiously interfered with the contractual relationships between Defendant and the Representatives by inducing the Representatives not to perform their obligations under the agreements. Count III alleges that Plaintiffs have been unjustly enriched as a result of the Representatives' breach of the agreements.
Plaintiffs' motion for summary judgment seeks summary judgment on all three counts of Defendant's counterclaims. Defendant's motion seeks summary judgment on all of Plaintiffs' claims. Because genuine issues of material facts remain as to several issues, the motions are each granted in part and denied in part. Plaintiffs' motion is granted as to Count III of Defendant's Counterclaim for unjust enrichment because the Agreements are express contracts that address the same subject matter. Plaintiffs' motion is denied in all other respects. Defendant's motion is granted as to Count I of the Second Amended Complaint for breach of contract to the extent the breach is based on the OEM program, granted as to Count II of the Second Amended Complaint because the agreements were not terminable at-will, and denied in all other respects.
Effective April 1, 2006, Plaintiffs Joseph A. LaPadula (LaPadula) and J.A. LaPadula, Inc. (JAL) entered into an Independent Representative Agreement (the 2006 Agreement) with Defendant Biotronik, Inc. (Biotronik) to act as independent sales representatives of Biotronik's cardiac rhythm management (CRM) devices. (DE-126-1.) In that agreement, LaPadula and JAL agreed to work as independent contractor sales representatives for Biotronik from April 1, 2006 until March 31, 2015 in a certain territory in south Florida. Three years later, effective August 1, 2009, Plaintiffs LaPadula, Scott D. Mathison (Mathison), and JMA, Inc. entered into an Independent Representative Agreement with Biotronik (the 2009 Agreement) to act as independent sales representatives for Biotronik's CRM devices. (DE-126-2.) In the 2009 Agreement, LaPadula, Mathison, and JMA agreed to work as authorized sales representatives for Biotronik from August 1, 2009 until March 31, 2015. In both agreements (jointly, the Agreements), Biotronik is defined as Biotronik, Inc., an Oregon Corporation. The Agreements state that they are governed by Oregon law.
The provisions of the Agreements that are relevant to this suit are those that address the term of the Agreements, termination of the Agreements, account deletion by Defendant, the definition of the products the Representatives can sell, the Representatives' post-termination obligations, and the so-called duty of loyalty. These provisions are set out below. However, because the Agreements contain virtually identical language, the relevant provisions are only set out once and any variation is noted in a footnote. Paragraph 1, which addresses the term of the Agreements, states:
(DE-126-1)
Paragraph 38 of the Agreements addresses termination:
(DE-126-1 & DE-126-2.)
Biotronik had the right to take back any accounts in a Representative's territory if sales fell below $100,000 in any year. (DE-126-1 at ¶5(c).) Specifically, the Agreements state:
(Id.)
The Agreement set out and defined what products the Representatives could sell. Under the terms of the Agreements, the Representatives were engaged to "promote, sell, distribute and service Products." (DE-126-1 at ¶2(a).) The Agreements define the term "Products" as:
(DE-126-1 at 34.)
The Agreements also contained what Biotronik refers to as a duty of loyalty clause, which states:
(DE-126 at ¶ 10.)
Finally, the Agreements contain a covenant not to compete provision that is effective for a period of one-year after termination of the Agreements. This provision prohibits the Representatives from contacting or soliciting any client, customer, or physician within the territory who the Representative had contact with within the last year on behalf of Biotronik. (DE-126-1 at ¶ 11.)
In November 2006, Biotronik's German sister entity, Biotronik GmbH n/k/a Biotronik SE (Biotronik-Germany) entered into a original equipment manufacturer (OEM) agreement with a competitor in the CRM business, Boston Scientific Corp. In the agreement with Boston Scientific, Biotronik-Germany agreed to supply Boston Scientific, for resale in the United States, with CRM leads. These leads were identical, except in name, to the CRM leads that Biotronik acquired from Biotronik-Germany and sold in the United States through sales representatives, including LaPadula and Mathison. In March of 2011, Biotronik-Germany entered into a similar OEM agreement with another CRM competitor, ELA/Sorin. Biotronik is the FDA regulatory agent for Biotronik-Germany and, as such, obtains FDA approval for all of Biotronik-Germany's CRM products. Thus, Biotronik obtained FDA approval for Biotronik-Germany's CRM products manufactured for the OEM agreements with Boston Scientific and ELA/Sorin. Biotronik is not a party to either of the OEM agreements. As with the CRM products supplied to Boston Scientific, the CRM products supplied to ELA/Sorin under the OEM agreements were identical, except in trade name, to CRM products that the Representatives offered for sale under the Agreements.
On May 25, 2011, Biotronik sent LaPadula, Mathison, and JMA a letter stating that it was formal notification of the deletion of certain accounts from their territory, pursuant to paragraph 5(c) of the Agreements. (DE-119-3.) Thereafter, in mid-2012, the Representatives retained counsel because they were unhappy with their employment situation with Biotronik. (DE-119-12 at 66:22-25.
On September 21, 2012, Defendant sent LaPadula and JAL a letter terminating the 2006 Agreement. (DE-126-5.) On the same date, Defendant sent LaPadula, Mathison, and JMA a letter terminating the 2009 Agreement. (DE-126-6.) The language of the two termination letters is essentially the same. Quoting paragraph 38(b)(2),
Summary judgment is appropriate when "the pleadings . . . show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); HCA Health Servs. of Ga., Inc. v. Employers Health Ins. Co., 240 F.3d 982, 991 (11th Cir. 2001). Once the moving party demonstrates the absence of a genuine issue of material fact, the non-moving party must "come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting Fed. R. Civ. P. 56(e)). The Court must view the record and all factual inferences therefrom in the light most favorable to the non-moving party and decide whether `the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997) (quoting Anderson, 477 U.S. at 251-52)).
In opposing a motion for summary judgment, the non-moving party may not rely solely on the pleadings, but must show by affidavits, depositions, answers to interrogatories, and admissions that specific facts exist demonstrating a genuine issue for trial. See Fed. R. Civ. P. 56(c), (e); see also Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). A mere "scintilla" of evidence supporting the opposing party's position will not suffice; instead, there must be a sufficient showing that the jury could reasonably find for that party. Anderson, 477 U.S. at 252; see also Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990).
Plaintiffs argue that all of Defendant's claims fail because they are premised on the belief that the Agreements were not terminable at-will, when, in fact, they were terminable at-will. Thus, Plaintiffs maintain that the Representatives did not breach the Agreements because they were terminable at-will and that SJM could not tortiously interfere with a contract that was terminable at-will. Defendant asserts that the Agreements were not terminable at-will but only for cause. Because the Agreements were not terminable at-will, Plaintiffs are not entitled to summary judgment on Biotronik's counterclaims based on Plaintiffs' at-will theory and Biotronik is entitled to summary judgment on Count II of Plaintiffs' Second Amended Complaint.
The relevant provisions of the Agreements are paragraphs 1 and 38. Paragraph 1 states:
Paragraph 38, in relevant part, states:
Defendant asserts that when these clauses are read together, they establish that the Agreements are for a term of years and may only be terminated for cause or at the end of the initial term or any successive term. Plaintiffs maintain that when read together these provisions permit any party to terminate without cause with timely written notice.
Oregon Statute
O.R.S. § 42.230. Thus, the Court must interpret the Agreements by looking at the actual language used by the parties in the Agreements. Moreover, a contract should not be interpreted to render any part of it meaningless. Oregon Bank v. Nautilus Crane & Equipment Corp., 683 P.2d 95, 105 (Or. App. 1984). Reading the Agreements as a whole requires the conclusion that they were not terminable at-will.
Paragraph 1(a) specifically states that the Agreement ends March 31, 2015 unless terminated as provided in the Agreement. The Agreement then provides three ways to terminate in paragraphs 1(c), 38(a), and 38(b). Paragraph 1(c), when read in context with the rest of paragraph 1, sets out the means for terminating the Agreement to avoid the automatic renewal, which is set out in paragraph 1(b). Paragraph 38 sets out the two remaining means for terminating the Agreement. Paragraph 38(b) permits Biotronik to terminate at any time for certain enumerated causes. The parties' dispute lies in the interpretation of paragraph 38(a).
Plaintiffs argue that paragraph 38(a) allows any party to terminate without cause upon timely written notice. However, if that is the meaning of paragraph 38(a), then paragraph 38(b) would be entirely superfluous. If the Agreements were terminable at-will then there would be no need for paragraph 38(b), which sets out when Biotronik can terminate the Agreements for cause prior to the end of the term. Cause would be irrelevant because either side could always terminate at-will. Thus, if the Agreements are interpreted as Plaintiffs urge, all of paragraph 38(b) would be meaningless, in violation of one of the canons of contract interpretation. Defendant argues that paragraphs 1(c) and 38(a) serve essentially the same purpose; they set forth the means by which either party may prevent the term from renewing under paragraph 1(b). Only by reading paragraphs 1(c) and 38(a) as the means for preventing renewal of a term can all of the provisions of the Agreements be given meaning. Thus, the Agreements were for a term of years, terminable either upon timely notice prior to renewal of the term, as set out in paragraphs 1(c) and 38(a), or for cause, as set out in paragraph 38(b).
Because the Agreements were not terminable at-will, Plaintiffs are not entitled to summary judgment on Count I of the counterclaim for breach of contract and Count II of the counterclaim for tortious interference. For the same reason, Defendant is entitled to summary judgment on Count II of the Second Amended Complaint, which seeks a declaration that the Agreements are terminable at-will.
Plaintiffs move for summary judgment on Count III of Biotronik's counterclaim for unjust enrichment. Plaintiffs assert that both Oregon and Florida law prohibit recovery for unjust enrichment when an enforceable contract exists between the parties. Biotronik has not responded to this argument. "[G]rounds alleged in the complaint but not relied upon in summary judgment are deemed abandoned." Resolution Trust Corp. v. Dunmar Corp. 43 F.3d 587, 599 (11th Cir. 1995). Thus, it appears Defendant has abandoned its unjust enrichment claim. Moreover, unjust enrichment cannot apply where an express contract exists concerning the same subject matter. Atlantis Estate Acquisitions, Inc. v. DePierro, 125 So.3d 889, 893-94 (Fla. 4th DCA 2013). Because the Agreements concern the same subject matter as Defendant's unjust enrichment claim, the unjust enrichment claim cannot stand. Consequently, Plaintiffs are entitled to summary judgment on Defendant's claim for unjust enrichment, Count III of the counterclaim.
Biotronik maintains that the Representatives breached the Agreements' duty of loyalty provision simply because they negotiated with SJM and, thus, Biotronik is entitled to summary judgment on Counts III and IV of the Second Amended Complaint. However, contrary to Biotronik's assertions, the Representatives' actions prior to the September 24, 2012 termination letter did not breach the Agreements' duty of loyalty provisions. As set out above, the duty of loyalty is defined in the Agreements as:
The Representatives' negotiations with SJM and even their alleged decision to sell the business to SJM and go to work for SJM do not violate the terms of this clause of the Agreements. Neither the negotiations nor the decision amount to "assisting or rendering services" to SJM. While the Representatives' actions may have violated the spirit of the provision, their actions did not violate the letter of the provision.
Plaintiffs maintain that Biotronik's termination of the Agreements was improper because it was not based on an actual violation of the duty of loyalty. To the extent that the termination was based on the alleged breach of the duty of loyalty provision, it was improper because, as set out above, the Representatives had not violated the duty of loyalty as of September 21, 2012. However, the termination letters state that the terminations are also based on violations of paragraphs 38(b)(5) and (6), which state:
Neither side has directly addressed whether Biotronik's termination of the Agreements was proper under these provisions of the Agreements. These provisions do not require an actual breach of a specific Agreement provision by the Representatives prior to termination. Moreover, these provisions leave to Defendant's "sole judgment" the determination of whether the Representatives' circumstances or conduct warrant termination. If the terminations were proper under these provisions, the Representatives would be obligated to comply with paragraph 11 of the Agreements, which sets out a one-year period of non-competition after termination. However, because the parties' motions did not discuss these two grounds for termination, summary judgment cannot be granted to Defendants on Count III of Plaintiffs' Second Amended Complaint, which seeks a declaration that Biotronik's improper termination of the Agreements vitiated any need for LaPadula and Mathison to terminate the Agreements before becoming employed by SJM.
Defendant also seeks summary judgment as to Count IV of the Second Amended Complaint, which seeks a declaration that the Representatives' post-termination obligations are excused due to Defendant's material breaches of the Agreements. In other words, if Biotronik did not breach the Agreements, the Representatives would still be bound by the post-termination provisions of the Agreements. Defendant argues that it is entitled to summary judgment on Count IV because the termination was proper (and, thus, the Representatives are still bound by the Agreements' post-termination provisions).
The OEM program is one of the bases for Plaintiffs' breach of contract claim in Count I and one of the bases for the declaratory relief sought in Count IV of the Second Amended Complaint. Plaintiffs maintain that Biotronik's OEM program impinged on the contractual rights of the Representatives and, thus, materially breached the Agreements. As a result of this alleged material breach, the Plaintiffs argue that the Representatives were excused from performance under the Agreements and SJM could not tortiously interfere with the Agreements. Biotronik responds by pointing out that the OEM program involved sales of CRM devices by Biotronik-Germany, a separate company, and that the Representatives were never authorized to sell OEM products. Thus, because Biotronik did not partake in the OEM program
While Plaintiffs allege that Biotronik breached the Agreements, Plaintiffs have not pointed to a single express provision of the Agreements that the OEM program breached. Nor have Plaintiffs pointed to an exclusivity provision in either Agreement. The only express provision actually cited by Plaintiffs is the provision defining "products." Under that provision and paragraph 2 of the Agreements, the Representatives may only sell:
Thus, by its very terms, this provision recognizes that the same products that the Representatives are authorized to sell may be available through some other source too.
Another basis for Plaintiffs' breach of contract claim is the implied duty of good faith and fair dealing. Under Oregon law:
Gibson v. Douglas County, 106 P.3d 151, 158 (Or. App. 2005). Plaintiffs argue that Biotronik violated the implied duty of good faith and fair dealing by facilitating the OEM program that inured to the benefit of competing CRM companies, thereby impinging on the Representatives' contractual rights. However, even assuming that Biotronik's involvement in obtaining FDA approval for the OEM program products constituted direct involvement in the OEM program by Biotronik, Plaintiffs have not established how Biotronik violated the implied duty of good faith and fair dealing. The Agreements did not contain exclusivity provisions and, in fact, recognized that the products that the Representatives were authorized to sell might be available through sources other than Biotronik. Thus, express terms of the Agreements govern the issues raised by Plaintiffs. Plaintiffs appear to be attempting to expand the express terms of the Agreement to include an exclusivity provision. However, they cannot do so using the duty of good faith and fair dealing. Because Plaintiffs have not established that Biotronik materially breached the Agreements, and thereby, excused the Representatives' performance under the Agreements, Plaintiffs are not entitled to summary judgment on Counts I and II of the Counterclaim.
The final basis for Plaintiffs' breach of contract claim is the deletion of accounts. While Defendant's motion for summary judgment on Count I of Plaintiffs' Second Amended Complaint must be granted to the extent the breach of contract claim rests on Biotronik's involvement in the OEM program, the motion must be denied to the extent the breach of contract claim rests on Biotronik's deletion of some of the Representatives' accounts.
Plaintiffs' Second Amended Complaint alleges that Defendant breached the Agreements by deleting certain accounts assigned to the Representatives. Defendant asserts that under the Agreements:
According to Defendant, the deleted accounts all had less than $100,000 in sales. Plaintiffs respond by arguing that Defendant has not presented sufficient evidence to establish that the sales in the deleted accounts fell below the $100,000 level, thereby giving Biotronik the right to delete the accounts. The only evidence Defendant presents to support the legitimacy of the accounts deletion is the testimony of Mr. McColloch. Defendant has not explained who he is, if he has personal knowledge of the sales made by the Representatives and why the accounts were deleted, and, most importantly, the testimony does not clearly state that the accounts were deleted because sales fell below the $100,000 mark. Inexplicably, neither side has submitted any actual sales records relating to the deleted accounts. Consequently, summary judgment is denied as to Count I of the Second Amended Complaint to the extent it is based on deletion of certain accounts.
Plaintiffs also move for summary judgment on Counts I and II of the counterclaim because they assert that Biotronik has no proof of damages. Proof of damages is an essential element of tortious interference, Imperial Majesty Cruise Line, LLC v. Weitnauer Duty Free, Inc., 987 So.2d 706, 707 (Fla. 4th DCA 2008), and breach of contract, Moini v. Hewes, 763 P.2d 414, 417 (Or. App. 1988). Biotronik has pled damages and seeks lost profits, based on past profits for the years remaining on the Agreements term, which ends in 2015. Plaintiffs seem to be challenging Biotronik's evidence to support the losses. Biotronik has, however, submitted evidence of past profits.
Plaintiffs' Motion for Summary Judgment is denied as to Counts I and II of the Counterclaim. However, to the extent Count I of the counterclaim, for breach of contract, is based on the Representatives' alleged breach of the duty of loyalty it is dismissed. Plaintiffs' Motion for summary judgment is granted as to Count III of the Counterclaim. Thus, Count III for unjust enrichment is dismissed.
Defendant's Motion for Summary Judgement is granted in part and denied in part as to Count I of the Second Amended Complaint for breach of contract. The motion is granted to the extent the breach of contract claim is based on the OEM program. Thus, the only remaining basis for Plaintiffs' breach of contract claim, Count I of the Second Amended Complaint, is Defendant's deletion of certain sales accounts from the Representatives' territory. Defendant's Motion for Summary Judgment is also granted as to Count II of the Second Amended Complaint because the Agreements were for a term of years; they were not terminable at-will. Defendant's Motion for Summary Judgement as to Counts III and IV of the Second Amended Complaint is denied. Consequently, the following claims remain to be tried:
The parties' joint Pretrial Stipulation is due
Accordingly, it is hereby
ORDERED THAT:
1) Plaintiffs/Counter-Defendants' Motion for Summary Judgment as to Biotronik's Counterclaims [DE-123] is GRANTED in part and DENIED in part:
2) Defendant Biotronik, Inc.'s Motion for Summary Judgment [DE-116] is GRANTED in part and DENIED in part:
DENIED in part as to Count I of the Second Amended Complaint:
DONE and ORDERED.
