Cardiovascular Sys., Inc. v. Cardio Flow, Inc.

37 F.4th 1357

CARDIOVASCULAR SYSTEMS, INC., Plaintiff - Appellant

v.CARDIO FLOW, INC., Defendant - Appellee

No. 20-3478

United States Court of Appeals, Eighth Circuit.

Submitted: March 15, 2022

Filed: June 14, 2022

Daniel L. Allender, Glenn Danas, I, Roman M. Silberfeld, Robins & Kaplan, Los Angeles, CA, Thomas Berndt, Robins & Kaplan, Minneapolis, MN, for Plaintiff-Appellant.

Joseph William Anthony, Daniel Ryan Hall, Joseph Robert Richie, Anthony & Ostlund, Minneapolis, MN, for Defendant-Appellee.

Before ERICKSON, GRASZ, and STRAS, Circuit Judges.

ERICKSON, Circuit Judge.

Cardiovascular Systems, Inc. ("CSI") brought this action against Cardio Flow, Inc. ("Cardio Flow"), alleging the breach of a settlement agreement that resolved ownership of intellectual property rights related to atherectomy devices. Cardio Flow was not a named party to the settlement, however, and moved for summary judgment on that basis. In response, CSI asserted that principles of equitable estoppel and agency bound Cardio Flow to abide by the agreement. The district court¹ rejected CSI's arguments and dismissed its claims. We affirm.

I. BACKGROUND

CSI and Cardio Flow are competitor firms in the medical device industry. CSI produces atherectomy devices, which remove built-up plaque from arteries. Cardio Flow is in the process of developing its FreedomFlow atherectomy device that is currently in clinical trials.

Dr. Leonid Shturman founded the medical device company that later evolved into CSI, where he became the chief executive officer. Several agreements required Dr. Shturman to assign the intellectual property rights from his inventions to CSI. During his employment, Dr. Shturman discovered a new technology for atherectomy devices called the "Counterweight Invention." It utilizes centrifugal forces to allow an atherectomy device to orbit inside an artery for improved abrasive effect.

The Counterweight Invention has been the focus of multiple lawsuits over the last 15 years. Not long after Dr. Shturman came up with the idea in 2002, he resigned from CSI and tried to patent the technology himself. Five years later, CSI sued him in federal district court and filed a parallel arbitration against his nascent company, Shturman Medical Systems, Inc. An arbitrator deemed CSI the rightful owner of the Counterweight Invention. Dr. Shturman settled the federal case and transferred his interest in the technology to CSI.

Despite the settlement, Dr. Shturman persisted in securing patents for orbital atherectomy devices. CSI again questioned his ownership, prompting Dr. Shturman to preemptively initiate a lawsuit in October 2009. But he died a month later, leaving the new patents’ ownership unresolved and whatever interest he had in them to his widow, Lela Nadirashvili.

Gary Petrucci—a CSI board member who managed the litigation against Dr. Shturman—contacted Nadirashvili shortly after her husband's death. She expressed dismay because she had "put all our money into [obtaining the new patents] and I'm broke." Petrucci responded, "Well, send me the patents. Let me take a look at it and maybe I can be of some help." Petrucci then introduced Nadirashvili to his personal intellectual property lawyers. Those same lawyers agreed to represent Nadirashvili pro bono in her effort to keep ownership of the patents. Petrucci resigned from CSI's board in March 2010 and founded Cardio Flow four months later. In his deposition, Petrucci testified that before starting Cardio Flow, he and Nadirashvili had discussed that she would receive 40 percent of the company's shares in exchange for the rights to her patents.

In 2012, Nadirashvili sued CSI in the District of Minnesota for a declaratory judgment that she owned the new patents. She maintained that they were not covered by the previous arbitration because they derived from fluid inflatable counterweights rather than the originally developed solid counterweights. The delineation between fluid and solid counterweights underlaid an August 2012 settlement agreement that instigates this dispute.

The settlement agreement separated the contested patents into the Nadirashvili Patent Portfolio and the CSI Patent Portfolio, each named for the respective assignee of the patent rights within them. Because the two portfolios had some overlap as to fluid and solid technologies, Section 3 of the settlement agreement set up inverse exclusive licenses. Nadirashvili conferred on CSI a "worldwide, royalty-free, paid-up, irrevocable exclusive right and license under the Nadirashvili Patent Portfolio to make, have made, use, offer to sell, sell and import rotational atherectomy devices or methods utilizing Solid Counterweights." In return, CSI granted Nadirashvili an identical license for "devices or methods utilizing Fluid Inflatable Counterweights."

Section 7 provided that Nadirashvili "may partner (which may include ... the sale of the Nadirashvili Patent Portfolio to a person or entity) with any individual or entity to develop the Nadirashvili Patent Portfolio, including Gary Petrucci." And Section 10 prohibited assignment of the settlement agreement absent written consent of the other party—with a lone exception:

[E]ither party may assign, without the consent of the other party, this Settlement Agreement and the rights, obligation and privileges herein in conjunction with a sale or transfer of the respective party's Patent Portfolio to a third party who has agreed, in writing promptly delivered to the other party, to be bound to this Agreement as if it were a party.

The order of dismissal specified that the district court would retain jurisdiction over the settlement agreement.

On November 16, 2012, Nadirashvili transferred her patent portfolio to Cardio Flow in exchange for shares and two monetary payments. She did not receive CSI's written consent before doing so. Cardio Flow never agreed in writing or otherwise to be bound by the settlement agreement. According to CSI, Cardio Flow eventually began developing its FreedomFlow device using solid counterweights, allegedly in violation of the exclusive right and license.

CSI commenced this action against Cardio Flow in Minnesota state court. The complaint as amended advanced claims for breach of contract, as well as declaratory and injunctive relief. Cardio Flow removed the case to federal court and successfully resisted a motion to remand. On cross-motions for summary judgment, the district court determined that Section 3 afforded CSI only "an exclusive license to certain patent rights under the Nadirashvili Patent Portfolio," not a broader exclusive right to practice solid counterweights generally. The district court then found that neither equitable estoppel nor agency theories supported binding Cardio Flow as a party to the settlement agreement and dismissed CSI's complaint.

II. DISCUSSION

CSI contends that the district court erred in deciding Cardio Flow was not a party to the settlement agreement by either equitable estoppel or an agency relationship. CSI does not assert on appeal that it has the exclusive right to practice solid counterweights. We review the district court's grant of summary judgment de novo , construing the evidence and all reasonable inferences for the nonmoving party. Meyer v. McKenzie Elec. Coop., Inc., 947 F.3d 506, 508 (8th Cir. 2020). Summary judgment is warranted when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).

A. Mootness

Before reaching the merits, we first address a challenge to our jurisdiction to decide this appeal. Article III of the Constitution limits federal judicial power to the determination of "Cases" and "Controversies." The necessity of an ongoing "dispute capable of judicial resolution," U.S. Parole Comm'n v. Geraghty, 445 U.S. 388, 403, 100 S.Ct. 1202, 63 L.Ed.2d 479 (1980), must endure throughout "all stages of federal judicial proceedings, trial and appellate," Lewis v. Cont'l Bank Corp., 494 U.S. 472, 477, 110 S.Ct. 1249, 108 L.Ed.2d 400 (1990). Cardio Flow asks us to dismiss this appeal as moot, arguing it would not impact the final result. See, e.g., In re Gretter Autoland, Inc., 864 F.3d 888, 891 (8th Cir. 2017) ("If nothing of practical consequence turns on the outcome of an appeal, then the appeal is moot."). We disagree.

Cardio Flow asserts that because CSI did not specifically appeal the dismissal of its requests for declaratory and injunctive relief and forfeited any right to damages below, the possibility of a remedy is foreclosed no matter what. Yet the district court dismissed the injunction claim on the sole ground that CSI lacked a broad exclusive right to practice solid counterweights. If we were to hold that a genuine fact dispute remains as to whether Cardio Flow became a party to the settlement agreement, CSI would be able to seek injunctive relief for the violation of its exclusive license to the solid counterweight technology in Nadirashvili's patent portfolio. See U.S. Valves, Inc. v. Dray, 212 F.3d 1368, 1376 (Fed. Cir. 2000), abrogated on other grounds by Gunn v. Minton, 568 U.S. 251, 133 S.Ct. 1059, 185 L.Ed.2d 72 (2013). Also, even if CSI surrendered actual damages in the district court (an issue we need not reach), the availability of nominal damages is enough to stave off mootness. Uzuegbunam v. Preczewski, 592 U.S. ––––, 141 S. Ct. 792, 802, 209 L.Ed.2d 94 (2021) ; see N.Y. State Rifle & Pistol Ass'n, Inc. v. City of N.Y., 590 U.S. ––––, 140 S. Ct. 1525, 1536, 206 L.Ed.2d 798 (2020) (Alito, J., dissenting) (observing "it is widely recognized that a claim for nominal damages precludes mootness"). In Minnesota, "[a]bsent proof of actual loss ... nominal damages are recoverable for breach of [a] contractual obligation." George Benz & Sons v. Hassie, 208 Minn. 118, 293 N.W. 133, 138 (1940). While a direct prayer for nominal damages does not appear in CSI's amended complaint, its "averment of general damages is sufficient to state a...