Globus Med., Inc. v. Vortex Spine, LLC

213 F.Supp.3d 719

GLOBUS MEDICAL, INC., Plaintiff,

v.VORTEX SPINE, LLC et al., Defendants.

CIVIL ACTION NO. 14-3105

United States District Court, E.D. Pennsylvania.

Signed September 30, 2016

Sarah E. Bouchard, Brandon Brigham, Morgan Lewis & Bockius LLP, Adam R. Roseman, Greenberg Traurig LLP, Philadelphia, PA, for Plaintiff.

Gary Green, Larry M. Keller, Sidkoff Pincus & Green PC, Philadelphia, PA, for Defendants.

MEMORANDUM

Jones, II, District Judge

Upon consideration of Plaintiff's Motion for Partial Summary Judgment, (Dkt No. 76), Memorandum of Law in Support thereof, (Dkt No. 76-2 [hereinafter MSJ]), and Statement of Undisputed Material Facts, (Dkt No. 76–3 [hereinafter SOF]), Defendants' Response, (Dkt No. 83), Memorandum of Law in Support thereof, (Dkt No. 84 [hereinafter Resp.] ), Response to Plaintiff's Statement of Undisputed Material Facts, (Dkt No. 84–10 at 1-34 [hereinafter RSOF] ), and Additional Statement of Disputed Material Facts, (Dkt No. 84–10 at 35-80 [hereinafter ASOF] ), Plaintiff's Response to Defendants' Additional Statement of Disputed Material Facts, (Dkt No. 92 [hereinafter RASOF] ), Plaintiff's Reply Memorandum of Law in Support of its Motion for Partial Summary Judgment, (Dkt No. 96 [hereinafter Rep.] ), and Defendants' Sur-Reply Memorandum of Law in Support of its Opposition to Plaintiff's Motion for Partial Summary Judgment, (Dkt No. 97 [hereinafter Sur-Rep.] ), and Defendants' Supplemental Memorandum of Law, (Dkt No. 104 [hereinafter Defs' Supp.] ), it is hereby ORDERED that said Motion is GRANTED IN PART AND DENIED IN PART for the reasons set forth herein.

I. Standard of Law

Under Federal Rule of Civil Procedure 56(a), a court shall grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine [dispute] as to any material fact and that the moving party is entitled to a summary judgment as a matter of law." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; FED. R. CIV. P. 56(a). "If the moving party meets its burden, the burden shifts to the nonmoving party to go beyond the pleadings and come forward with specific facts showing that there is a genuine issue for trial." Santini v. Fuentes , 795 F.3d 410, 416 (3d Cir. 2015) (internal citations and quotation marks omitted). Therefore, in order to defeat a motion for summary judgment, the non-movant must establish that the disputes are both (1) material, meaning concerning facts that will affect the outcome of the issue under substantive law; and (2) genuine, meaning the evidence must be such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment is mandated "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex , 477 U.S. at 322, 106 S.Ct. 2548. "At the summary judgment stage of proceedings, courts do not ‘weigh the evidence or make credibility determinations,’ but, instead, leave that task to the fact-finder at a later trial if the court denies summary judgment." Halsey v. Pfeiffer , 750 F.3d 273 (3d Cir. 2014) (quoting Petruzzi's IGA Supermarkets v. Darling – Delaware Co. , 998 F.2d 1224, 1230 (3d Cir. 1993) ).

II. Background

a. Parties and Non-Parties

Globus Medical, Inc. ("Globus") is a publicly held company, founded in 2003. (SOF ¶¶ 1; RSOF ¶¶ 1; ASOF ¶ 8; RASOF ¶ 8; United States S.E.C. Form 10-K, Dkt No. 77, Ex. 1.) James "Jamie" Long was the founder and owner of Vortex Spine, LLC ("Vortex"), formed in 2004 as a Globus Distributor. (ASOF ¶ 1; RASOF ¶ 1; James Long Dep., July 23, 2014, Dkt No. 85, Ex. 1¹ [hereinafter Long Dep.] 36:16-20.) Vortex Spine, LLC was a distributor of medical products manufactured by Globus between 2004 and April 18, 2014. (SOF ¶¶ 10, 12; RSOF ¶¶ 10, 12; Exclusive Distributor Agreement, Dkt No. 77, Ex. 3 [hereinafter EDA]; Ltr. from Globus to James Long, April 23, 2015, Dkt No. 85, Ex. B [hereinafter Termination Ltr.]; Long Dep. 6:9-13, 34:24-35:2, 36:16-37:10.)

Patrick O'Hara and Wallace Schaefer were independent contractors for Vortex and sold spinal implant products to Globus's customers. (SOF ¶ 15; RSOF ¶ 15; ASOF ¶ 59; RASOF ¶ 59; Patrick O'Hara, July 15, 2014, Dkt No. 77, Ex. 8 [hereinafter O'Hara Dep.] 169:18-170:3; Wallace Schaefer, July 14, 2014, Dkt No. 77, Ex. 9 [hereinafter Schaefer Dep.] 71:13-72:8, 76:20-77:4). Such Vortex personnel (1) identified potential customers; (2) developed and fostered customer relationships for continued, repeat business; and (3) coordinated with customers to provide training on the equipment Globus offers. (SOF ¶ 16; ASOF ¶ 16; O'Hara 169:18-170:3; Schaefer 71:13-72:8, 76:20-77:4.) On September 7, 2007, Mr. O'Hara signed a No Competition Non-Disclosure Agreement ("NCND") with Globus that included a one year restrictive covenant relating to products used in spine surgery. (ASOF ¶ 129; RASOF ¶ 129; Dkt No. 85, Ex. M [hereinafter O'Hara NCND].) Vortex and Long are not parties to Mr. O'Hara's NCND Agreement. (O'Hara NCND.) On July 25, 2011, Mr. Schaefer signed a NCND with Globus under the same terms. (ASOF ¶ 130; RASOF ¶ 130; Dkt No. 85, Ex. L [hereinafter Schaefer NCND].) Mr. O'Hara and Mr. Schaefer are not parties to this lawsuit.²

b. The Exclusive Distributor Agreement and its Termination

Mr. Long, on behalf of Vortex, signed an Exclusive Distributor Agreement ("EDA") with Globus beginning on January 1, 2010 and terminating on December 31, 2013. (EDA ¶ 2.1.) The EDA states the following regarding confidentiality and competition:

5.1.1. No Competition-Competing Company . During the Term of this Agreement, neither Distributor nor any of its employees, agents, representatives, nor Principals, nor Principals' immediate family members shall directly or indirectly, become a proprietor, stockholder, director, officer, employee, agent, representative or member of any entity in the continental United States which his engaged in the medical products business; provided that the purchase for investment of not more than five (5%) percent of the total capital stock of such competing enterprise or business whose stock is publicly traded shall not constitute a violate of this Section 5.

5.1.2 No Competition-Competing Products . Distributor, nor Principals, nor Principal's immediate family members shall directly or indirectly:

(A) Other Products . During the Term of this Agreement [January 1, 2009-December 31, 2013], manufacture, sell, market, or deliver any product or participate in any manner in such activities, if such product is manufactured, sold, marketed or distributed by any company or its affiliates engaged in the medical products business without express written consent of Company. Company expressly reserves the right to withhold such consent if it deems it to be in the best interests of the Company, for any reason. The restrictions in this Section 5.1.2(A) shall also apply during the two (2) year period after the termination of this Agreement ("Post-Termination Restriction Period") for any reason whatsoever. However, during the Post-Termination Restriction Period, these restrictions shall only preclude the above activity in the Territory³ [ ] with any companies engaged in the spinal products business ("Spinal Products Companies"). For purposes of this Section 5.1, companies engaged in the spinal products business also include companies that are agents or affiliates of companies engaged in providing medical products or services associated with the spine.

(B) Non Compensation . During the Term of this Agreement, accept compensation in any kind from any company or its affiliates engaged in the medical products business, without the express written consent of Company. During the Post-Termination Restriction Period, this restriction shall only preclude compensation from any Spinal Products Companies for activity or services rendered or related to the Territory.

(C) Employee/Distributor Recruitment . During the Term of this Agreement and the Post-Termination Restriction Period, induce or influence or attempt to induce or influence, any person engaged as an employee or agent of Company at the time this Agreement terminates, or within the last twelve months preceding the Agreement termination, to terminate his/her relationship with the Company.

(D) The provisions of this Section 5 .1.2 [sic ] shall be in addition to the provisions of the No Competition and Non Disclosure Agreement executed by Principal(s) pursuant to 5.5, which is incorporated here by reference.

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5.5 Distributor and Employee NCND Agreements . Distributor shall require each Principal, employee, agent or sales representative who participates in the promotion or sale of Products to execute the No Competition and Non-Disclosure Agreement ("NCND Agreement") in the form of the NCND Agreement template contained in Exhibit D. Distributor agrees to assign all of its rights and benefits under any such NCND Agreements to Company, at Company's request. Distributor shall not cause any of its Principals, employees, agents or sales representatives to enter into any agreement contrary to, or that would undermine, the benefits and protections contained in the NCND Agreement...

5.6 Separate Agreement and Survival of Section 5 . The provisions of this Section 5 constitute a separate agreement and shall survive the expiration or sooner termination of this Agreement.

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10.7 Entire Agreement . This Agreement, and any exhibits hereto, constitutes the entire Agreement between the parties relating to the matters covered by this Agreement, supersedes all prior agreements, whether written or oral, and shall control over any other statement, representation or agreement by the Company.

(EDA ¶¶ 5.1, 5.5-5.6, 10.7.)

EXHIBIT D

EXCLUSIVE...