NuVasive, Inc. v. Rival Med.

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NUVASIVE, INC., Plaintiff, v. RIVAL MEDICAL, LLC, TIMOTHY DAY and MONIQUE DAY, Defendants.

No. 21-cv-11644-DJC

United States District Court, D. Massachusetts

February 27, 2024

MEMORANDUM AND ORDER

Denise J. Casper United States District Judge

I. Introduction

Plaintiff NuVasive, Inc. (“NuVasive”) has filed this lawsuit against Defendants Rival Medical, LLC (“Rival”), Timothy Day (“Day”) and Monique Day (“Ms. Day”) (collectively, the “Defendants”) seeking to pierce Rival's corporate veil (Count I), establish that Day is Rival's alter ego (Count II), and obtain a judgment declaring that Rival fraudulently transferred its assets and property in violation of Mass. Gen. L. c. 109A, § 1 et seq. (Count III). D. 1. Defendants moved for summary judgment on all counts. D. 48. NuVasive filed a motion for partial summary judgment on Counts I and II, D. 76, a motion for sanctions for spoliation, D. 78. For the reasons stated below, the Court DENIES Defendants' motion for summary judgment and ALLOWS NuVasive's motion for partial summary judgment. The Court also DENIES the sanctions motion in part and ALLOWS it in part.

II. Standard of Review

The Court grants summary judgment where there is no genuine dispute as to any material fact and the undisputed facts demonstrate that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). “A fact is material if it carries with it the potential to affect the outcome of the suit under applicable law.” Santiago-Ramos v. Centennial P.R. Wireless Corp., 217 F.3d 46, 52 (1st Cir. 2000). The movant bears the burden of demonstrating the absence of a genuine issue of material fact. Carmona v. Toledo, 215 F.3d 124, 132 (1st Cir. 2000); see Celotex v. Catrett, 477 U.S. 317, 323 (1986). If the movant meets its burden, the non-moving party may not rest on the allegations or denials in its pleadings, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986), but must come forward with specific admissible facts showing that there is a genuine issue for trial. Borges ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 5 (1st Cir. 2010). The Court “view[s] the record in the light most favorable to the nonmovant, drawing reasonable inferences in his favor.” Noonan v. Staples, Inc., 556 F.3d 20, 25 (1st Cir. 2009). “When deciding cross-motions for summary judgment, the court must consider each motion separately, drawing inferences against each movant in turn.” Reich v. John Alden Life Ins. Co., 126 F.3d 1, 6 (1st Cir. 1997) (citation omitted). “Conclusory allegations, improbable inferences, and unsupported speculation,” however, are “insufficient to establish a genuine dispute of fact.” Travers v. Flight Servs. & Sys., Inc., 737 F.3d 144, 146 (1st Cir. 2013) (citation and internal quotation mark omitted).

III. Factual Background

The following facts are undisputed unless otherwise noted and are drawn from the parties' statements of facts, briefing, and accompanying documents.^[1] NuVasive obtained a monetary judgment against Rival on December 8, 2020 in the amount of $591,181.00 in an arbitration proceeding (the “Arbitration Award”). D. 48 at 1; D. 1-2 at 7. NuVasive obtained a judgment confirming the Arbitration Award from this Court with prejudgment interest for a total of $617,485.04 with post-judgment interest to be incurred. D. 48 at 1; D. 1-3. This litigation arises out of Rival's failure to satisfy the Arbitration Award and NuVasive seeking to collect it from the Days. D. 1 at 11. NuVasive and Defendants previously have been engaged in related litigation, including NuVasive, Inc. v. Day, No. 19-cv-10800-DJC (D. Mass.) (the “Related Litigation”).

A. LLC Formation and Corporate Formalities

Rival Medical, originally Goodday Medical, LLC (“Goodday”), was formed in March 2013 with the purpose of selling and distributing medical devices to hospitals in Massachusetts. D. 48 at 2; D. 48-1. On February 13, 2018, Goodday changed its name to Rival. D. 48 at 3; D. 48-3.^[2] Day capitalized Rival in January 2019 with a $15,000 investment. D. 48 at 12; D. 48-10; D. 53 at 11.

Ms. Day was identified as the manager of Rival at its formation and throughout its existence. D. 48-1; D. 48-2; D. 48-3. Rival was solely owned by Day, and he was the only member. D. 48 at 4, 7, 11, 12-13, 15. As sole member and owner, Day controlled the affairs of Rival, including making decisions on behalf of the company. D. 48 at 10-11; D. 53 at 5. Day testified that he does not know if Rival had an operating agreement or bylaws or whether it ever held a members meeting. D. 53 at 14; D. 53-11 at 10-11; D. 54 ¶ 27. Day also could not recall if he voted on issues involving Rival or if Rival ever took action by written consent. D. 53 at 15; D. 53-11 at 11.

Rival failed to file tax returns between 2013 and 2016, D. 54 at 2 ¶ 2, but it did so between 2016 and 2019. D. 48 at 4; D. 54 at 2 ¶ 2; D. 48-5. Rival maintained a separate business bank account and a separate business credit card, D. 48 at 4; D. 54 at 2 ¶¶ 3-4, but records reveal that the Days used some of its funds for personal use. D. 48 at 4; D. 54 at 2 ¶ 4; D. 48-8; D. 57 at 6; D. 54 at 3 ¶ 8. It employed no less than fifteen employees, including Day, D. 48 at 4; D. 54 at 2 ¶ 5; D. 48-9; D. 57 at 5, but Rival had insufficient funds to pay the monies due its staff by the time Rival stop performing services for NuVasive. D. 54 at 6 ¶ 25. Lisa Day, Day's mother, was on Rival's payroll and received a salary. D. 53 at 17 n.11; D. 53-11 at 68. She did “some bookkeeping” for Rival, but there is no record of such bookkeeping and Day does not recall if she was on payroll solely for purposes of being on its insurance plan. D. 53 at 17 n.11; D. 53-11 at 27-28.

B. Relationship with Alphatec

In 2016 and 2017, Rival worked with SP2 Medical, LLC d/b/a Magellan Medical (“Magellan”), a NuVasive distributor at the time. D. 53 at 7; D. 53-13. Magellan paid Rival its commissions directly into the Days' personal checking account. D. 53 at 7; D. 53-14; D. 54 ¶ 9. In 2017, Day became frustrated with Magellan and was considering moving elsewhere. D. 77 at 5; D. 77-5 at 5-6. He entered conversations with other companies, including Alphatec. D. 77 at 5; D. 77-5 at 4-5. Day ultimately decided to continue selling NuVasive products, at least in part, because NuVasive separated with Magellan and agreed to award Day the distributorship for that sales territory. D. 77 at 5; D. 77-5 at 6. On January 1, 2018, Day became a “territory manager” for NuVasive. D. 77 at 5; D. 77-5 at 4. Nonetheless, Day continued his discussions with Alphatec and its Chief Executive Officer, Patrick Miles (“Miles”). D. 77 at 5-6; D. 77-5 at 9, 17.

On January 1, 2019, Rival and NuVasive entered into a distributorship agreement (the “Distributorship Agreement”) for the sale and distribution of medical devices in and around the Boston area. D. 48 at 3; D. 48-4. The Distributorship Agreement included non-compete and nonsolicitation provisions. D. 48-4 at 8. In February 2019, Day reached back out to Miles and Alphatec regarding employment there. D. 77-5 at 17-18, 21. Notably, as part of the “transition process,” Miles identified several action steps to discuss, including Day's resignation from NuVasive, Day's non-compete obligations to NuVasive and legal “expectations” and indemnification. D. 77 at 6; D. 77-5 at 21.

Day traveled to California March 21-22, 2019 with Adam Richard (“Richard”), a Rival salesperson, to dine with Miles, D. 77 at 6-7; D. 77-5 at 19, 25, resulting in a “handshake deal” between Miles and Day. D. 77 at 7; D. 77-5 at 22.

C. Breach of Distributorship Agreement

The parties dispute the exact date that the Distributorship Agreement was terminated. D. 48 at 3; D. 54 at 1 ¶ 1. However, they agree that Rival stopped performing services for NuVasive no later than April 1, 2019. D. 48 at 3; D. 53 at 13. NuVasive withheld payment of commissions, per the Distribution Agreement, when Rival stopped performing services. D. 53 at 13; D. 53-12 at 8-9. Rival did not have sufficient funds to pay its salespersons the salaries and commissions earned when it stopped performing services for NuVasive. D. 53 at 12; D. 53-12 at 8; D. 54 ¶ 25. Following Rival's separation from NuVasive, Day used his Rival email address to negotiate a sale of Alphatec products. D. 53 at 7; D. 53-11 at 107; D. 54 ¶ 10.

On May 6, 2019, Day emailed his accountant “to set up a new business,” which should “be done in the same manner as Rival medical,” with the purpose of “selling and disrupting [sic] medical products.” D. 53-20. By May 9, 2019, his new LLC, Northeast Innovative Solutions LLC d/b/a Maverick Medical (“Maverick”) was set up. D. 53 at 15; D. 53-11 at 5; see D. 53-18; D. 5319. Alphatec is one of the companies with which Maverick contracts. D. 53-11 at 6. Rival was formally dissolved by the Massachusetts Secretary of the Commonwealth on June 30, 2021. D. 48 at 3; D. 48-3.

D. Intermingling of Funds between Rival and Day

1. Use of Rival's Jet Blue Credit Card

The Days used Rival's Jet Blue Credit Card for personal expenses. D. 53 at 9. For one example, on January 21, 2019 Day charged $2,706.13 to the credit card for a hotel stay in Florida. D. 53 at 9; D. 53-11 at 86; D. 54 ¶ 13. He does not recall what business, if any, Rival may have been conducting. D. 53-12 at 104. Prior to Rival's separation from NuVasive, Day also made other charges to Rival's Jet Blue Card in February to March 2019. D. 53 at 9; D. 53-11 at 91-92; D. 54 ¶ 14. For other examples, on February 12, 2019, Ms. Day used the charge card to pay the electric bill for the Days' primary residence, D. 53 at 9; D. 53-11 at 88; D. 53-16 at 18; D. 54 ¶ 15, and used Rival's Jet Blue Card and bank account to pay for utilities and landscaping services for their properties...