Shea v. Millett

36 F.4th 1

Joseph B. SHEA, Plaintiff, Appellant,

v.Peter MILLETT, Defendant, Appellee,ALM Research LLC, Defendant.

No. 21-1044

United States Court of Appeals, First Circuit.

May 27, 2022

David R. Suny, with whom Mary Theresa Moran and McCormack Suny LLC were on brief, for appellant.

Joseph P. Davis, III, with whom Mian R. Wang, Alison T. Holdway, and Greenberg Traurig, LLP were on brief, for appellee.

Before Lynch, Kayatta, and Gelpí, Circuit Judges.

AMENDED OPINION^*

LYNCH, Circuit Judge.

In this action under Massachusetts law by Joseph B. Shea ("Shea") for an alleged breach of an oral contract by Dr. Peter Millett ("Millett"), the district court on cross-motions entered summary judgment for Millett. The district court correctly concluded that Shea had not satisfied the special provision of the Massachusetts statute of frauds for brokers and finders, Mass. Gen. Laws ch. 259, § 7, to establish a contractual obligation for Millett to make payments to Shea beyond June 30, 2016. We affirm.

I.

We refer to the district court decision for a fuller discussion of the facts. Shea v. Millett, No. 17-cv-12233, 2020 WL 6586368 (D. Mass. Nov. 10, 2020). We discuss for our analysis the particular facts on which Shea relies. Importantly, it is undisputed that Millett never signed any writing agreeing to pay Shea for the period Shea alleges. Shea's claims are based on his alternative arguments that the Massachusetts statute of frauds does not apply and that, even if it does, it is satisfied by a series of writings and statements in the record.

Millett is an orthopedic surgeon. He first met Shea -- a former sales representative of orthopedic sports medicine-related products manufactured and developed by Arthrex, Inc. -- in July 2001 at a sports medicine-focused meeting in Colorado. Shea introduced Millett to Arthrex around that time, and Millett has been a consultant and product-development surgeon for Arthrex since at least 2003.

In March 2010, Millett spoke with Shea at a medical conference in New Orleans, seeking Shea's help in negotiating a deal with Arthrex for Millett's work on certain products. Millett believed Shea had contacts at Arthrex that would be valuable to Millett's efforts in obtaining a royalty agreement with the company. The two had a ten- to fifteen-minute conversation at a bar about such an arrangement. Shea testified at his deposition that Millett offered during that conversation "15 percent of what [Millett] get[s] paid," to which Shea responded he "would rather get 10 percent for the life of the deal." Although the parties "didn't really discuss the details," Shea understands this conversation to have created a binding agreement. Millett disagrees.

The parties continued to discuss their arrangement between March and June 2010. In an email dated April 2, 2010, with the subject line "Agent agreement," Shea wrote the following to Millett:

I'm excited about getting started on our new business relationship and I wanted to summarize our agreement with respect to the work that I will perform as your agent and business consultant. ...

*Consulting fee: $200.00 per hour ... billed 15 minute increments, when preparing documents, meeting with potential partners and discussing details, offers and plans with you. You will receive a monthly or weekly email invoice as you prefer.

...

*I will be paid 10 percent of any royalties, consulting fees, equity earned after the first $150,000 per year that you earn.

...

Millett did not respond to this email.

Shea sent Millett another email discussing the arrangement on April 7, 2010, this time adding a proposal for a "performance bonus ... based on the significance of the deal signed with [their] new partner." There is no record of Millett responding to that email. On June 2, 2010, Shea sent Millett an invoice for 26.5 hours of consulting work at a rate of $200 per hour. Millett paid the invoice.

Five days later, Shea forwarded to Millett his April 2 email, asking him to "read it and email to confirm that [he] ha[s] read it and agree[s]." Millett responded the same day, asking Shea to "clarify [his] thoughts on the payments on royalties and payments on consulting over 150k," as he "assume[d] this [wa]s for Smith [&] Nephew only." (emphasis added). Smith & Nephew is Arthrex's competitor. Millett also asked: "[W]hat is the Term on this? Is this forever?" Millett's communication certainly does not confirm any agreement with Shea's proposed terms.

Shea responded the same day, June 7, 2010, that he thought the ten percent applied to "any royalties that [Millett was] paid by [S]mith [&] [N]ephew or Arthrex" if Millett and Shea "were able to get [Arthrex] to pay [Millett] retroactively ... based on [their] negotiations with [Arthrex's representative] ...." As for the duration of the agreement, Shea asked: "tell me your thoughts ... I think it should last as long as you[r] contract with [S]mith [&] [N]ephew or Arthrex lasts."

Shea also wrote that Millett could call him that night to discuss. There is no record of Millett ever agreeing to these terms, either by email or orally.

The parties view these exchanges differently. Shea testified at his deposition that they obligated Millett to pay Shea ten percent of any royalties Millett earned for "[a]s long as [Millet] get[s] paid by Arthrex." According to Shea, Millett was obligated to do so, regardless of whether Shea brought new business deals to Millett. To the contrary, Millett testified in his deposition: "I don't think we had mutually agreed on many things, but we agreed on certain things," e.g., the "10 percent for royalties after the first $150,000 was subtracted out if he could negotiate the royalty contract ...." Millett stated that he, at the time, expected Shea would "bring new opportunities," and that Millett "never agreed to an agreement in perpetuity."

The 2011 corporate minutes from Millet's company, ALM Research LLC (the "2011 minutes"),¹ reflect Millett's understanding and state: "Joe Shea -- negotiating business deals. Percentage of royalties, bring new business opportunities to ALM." The minutes further state: "The verbal agreement with Joseph Shea should be formalized. Contact Joseph Shea about his willingness to formalize an agreement." (emphasis added). Nothing was ever formalized. Shea performed no relevant work for Millett after at least 2011 and secured no new deals for him with Arthrex or any other company.

In August 2010, Millett received a draft royalty agreement from Arthrex, which he executed in September 2010 (the "2010 Royalty Agreement"). Under the 2010 Royalty Agreement, the relevant royalty payments terminated on March 31, 2016, and could be extended for a multi-year period "by mutual agreement of the parties."

Millett, through his wife as bookkeeper, began paying Shea ten percent of all royalties he received from Arthrex (for products both included in and outside of the 2010 Royalty Agreement), although "early on," Shea and Millett disagreed about their arrangement, including over the duration of the payments to Shea. Millett testified at his deposition that he paid Shea, not because Shea "fulfill[ed] what [they] agreed upon," but because Shea "was going through a period of personal hardship" and "professional hardship," and Shea "was a friend."

In July 2013, Millett sent Shea a draft "Mutual Settlement and Release" (the "2013 Draft Release"), apparently to resolve disagreements about the terms of their 2010 oral agreement, including the duration. Shea disputes that there was any disagreement over the 2010 oral agreement and argues the parties never agreed to limit the duration of payments to Shea to the initial term of any royalty agreement secured. The 2013 Draft Release cited April 30, 2015 as the termination date of the payments to Shea. The Draft Release also states, inter alia:

QUARTERLY PAYMENTS to Mr[.] Shea will be calculated based upon a previously agreed upon formula of 10% of the net royalty payments to ALM Research, LLC that are paid quarterly by Arthrex, Inc. for a contract which was negotiated with the assistance of Mr[.] Shea in August of 2010 between Dr[.] Millett / ALM research and Arthrex, Inc.

Based on our review of the record, neither Shea nor Millett ever signed that Draft Release. In fact, Millett made payments to Shea until June 30, 2016 (through the initial term of the 2010 Royalty Agreement),² for a total of more than $600,000.

In November 2015, Arthrex emailed Millett to inform him that the relevant royalty payments under the 2010 Royalty Agreement were set to expire. After that, Arthrex and Millett -- without the help of Shea -- agreed to extend the Agreement (the "2016 Extension"). The relevant royalties under the 2016 Extension were set to expire on a date certain several years later. In August 2016, Millett left Shea a voicemail and sent him a text message informing Shea of the expiration of the 2010 Royalty Agreement.

Shea filed this lawsuit in 2017, asserting that he is owed payments beyond the final payment made on June 30, 2016, based on the purported oral contract from 2010.³ In 2018, Millett entered into a new royalty agreement with Arthrex that explicitly terminated the 2016 Extension (the "2018 Royalty Agreement"). The relevant royalty payments under the 2018 Royalty Agreement expire on a defined termination date a few years after the effective date. Shea played no role in Millett's receipt of that royalty contract.⁴

On October 26, 2020, the district court entered summary judgment in favor of Millett as to all claims against him, and the court denied Shea's motion for leave to amend his complaint. Shea, 2020 WL 6586368, at *1. The court held that any agreement between the parties was unenforceable under the Massachusetts statute of frauds, Mass. Gen. Laws ch. 259, §§ 1, 7. Id. at *9–11. On Shea's motion, the district court entered a separate final judgment on Shea's claims under Fed. R. Civ. P. 54(b). Shea appeals from that judgment, arguing that the statute of frauds is inapplicable and,...