180 Degree Sols. v. Metron Nutraceuticals, LLC

• Decision Date: 12 August 2021
• Docket Number: 109986
• Parties: 180 DEGREE SOLUTIONS LLC, Plaintiff-Appellant, v. METRON NUTRACEUTICALS, LLC, ET AL. Defendant-Appellees.
• Court: Ohio Court of Appeals

2021-Ohio-2769

180 DEGREE SOLUTIONS LLC, Plaintiff-Appellant, v. METRON NUTRACEUTICALS, LLC, ET AL. Defendant-Appellees.

No. 109986

Court of Appeals of Ohio, Eighth District, Cuyahoga

August 12, 2021

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-17-888247

Hahn Loeser & Parks L.L.P., Dennis R. Rose, Daniel A. DeMarco Michael B. Pascoe, and David M. Hopkins, for appellant.

Lewis Brisbois Bisgaard & Smith L.L.P., Ryan K. Rubin, Greg Amend, and Daniel A. Leister, for appellees.

JOURNAL ENTRY AND OPINION

MARY J. BOYLE, A.J.

{¶ 1} Plaintiff-appellant, 180 Degree Solutions, LLC ("180"), appeals from the trial court's denial of its motion for judgment notwithstanding the verdict ("JNOV") and other discovery and expert rulings after the jury returned a verdict in favor of defendants-appellees, Metron Nutraceuticals, LLC and Dr Nikolaos Tsirikos-Karapanos. 180 raises two assignments of error for our review:

1. The trial court erred in its denial of Appellant's Motion for Judgment Notwithstanding the Verdict.

2. The cumulative effect of the trial court's pre-trial discovery and expert rulings against Appellant constitutes an abuse of discretion.

{¶ 2} Finding merit to 180's first assignment of error, we reverse and remand with instructions for the trial court to enter judgment in favor of 180 on Metron's claim for breach of contract. We overrule 180's second assignment of error.

I. Procedure Before Trial

{¶ 3} In October 2017, 180 filed a complaint against Metron and its owner, Dr. Tsirikos-Karapanos, for fraud and negligent misrepresentation. The complaint stemmed from a distribution agreement entered between 180 and Metron for a nutritional supplement ("HCF-C" or "CytoDetox"). In an amended complaint before Metron and Dr. Tsirikos-Karapanos filed an answer, 180 added claims for tortious interference with business relations and breach of contract. 180 claimed that Metron and Dr. Tsirikos-Karapanos made false representations about how CytoDetox should be consumed.

{¶ 4} In January 2018, Metron and Dr. Tsirikos-Karapanos filed an answer. They also brought counterclaims against 180 and a third-party complaint against its owner, Warren Phillips, for abuse of process, breach of contract, negligent misrepresentation, tortious interference with business relations, and fraud. Metron and Dr. Tsirikos-Karapanos claimed that 180 breached various provisions of the distribution agreement, misrepresented that CytoDetox caused tongue inflammation, overstated its customer base, and engaged in fraudulent behavior.

{¶ 5} In March 2020, 180 and Phillips moved to dismiss the counts for abuse of process and fraud from the counterclaim and third-party complaint for failure to state a claim upon which relief can be granted. The trial court denied the motion, and 180 and Phillips filed an answer.

{¶ 6} In November 2018, 180 and Phillips sought leave to file a second amended complaint, which the trial court granted. 180 and Phillips added allegations that recent tests of CytoDetox showed that Metron was supplying a "minimal strength version of its product that has nowhere close to the represented dose of active ingredient[.]"

{¶ 7} Before trial, the trial court denied three of 180's motions to compel the production of documents and struck 180's expert witness for untimely disclosure. The trial court also denied 180's motions in limine to exclude reference to Phillips's business partner, testimony that 180 had violated FDA regulations, and argument that 180 breached the distribution agreement on theories not included in Metron's complaint.

{¶ 8} The week before trial, Metron and Dr. Tsirikos-Karapanos voluntarily dismissed their claim for tortious interference with business relations from their counterclaim and third-party complaint. 180 also dismissed its claim for tortious interference with a business relationship.

II. Trial Procedure and Evidence

{¶ 9} The case proceeded to a jury trial in February 2020. In its case in chief, 180 presented Phillips and Dr. Tsirikos-Karapanos as if on cross-examination. For its case in chief, Metron presented four witnesses: Dr. Tsirikos-Karapanos, Phillips as if on cross-examination, and the videotaped deposition testimony of Erin Smith (180's former regional sales manager) and Sean Behun (180's former chief financial officer). 180 also presented Bill Labovitz (180's legal counsel) as a rebuttal witness to Behun's testimony. For clarity, we will describe the trial evidence in chronological order of the underlying events rather than the order in which each witness testified at trial.

{¶ 10} Dr. Tsirikos-Karapanos testified that he developed a process to create hydrolyzed clinoptilolite fragments ("HCF"), which are consumed to remove toxins from the body. He explained that Metron creates a concentrate of the fragments and sends the concentrate to contract manufacturing organizations, which dilute the concentrate with water and add vitamin C to create the final product, hydrolyzed clinoptilolite fragments with vitamin C, or "HCF-C." Dr. Tsirikos-Karapanos explained that the commercial name for HCF-C was "CytoDetox." The contract manufacturing organizations would bottle the CytoDetox, test it pursuant to FDA regulations, and ship Metron samples with certificates of analyses for each batch.

{¶ 11} Phillips testified that Metron reached out to him to see if he would help bring CytoDetox to market. Dr. Tsirikos-Karapanos testified that Phillips and his business partner said they had a large distribution network and could reach "tens of thousands" of practitioners in the United States. 180's former regional sales manager, Erin Smith, testified that in 2015, Phillips was building the business "literally from the ground up, from ground zero."

{¶ 12} Dr. Tsirikos-Karapanos and Phillips testified that in January 2015, Metron and 180 entered the distribution agreement, which was admitted into evidence. The agreement states that 180 has the exclusive right to distribute Metron's professional strength "product" to healthcare practitioners within the United States. Appendix B to the agreement defines "product" as "Hydrolyzed Clinoptilolite Fragments (HCF)." The agreement sets forth minimum quantities that 180 must purchase to maintain its exclusive right to sell the product.

{¶ 13} The distribution agreement provides that 180 "assures" Metron that it or its affiliated entities have the "facilities, personnel, and technical expertise necessary to market the products." It also states that 180 is responsible for developing marketing materials, but 180 must obtain Metron's prior written approval before using them. The agreement states that if 180 "ceases to market and sell" HCF for Metron "for any reason," 180 and Metron "shall not use any such product name or logo/graphic unique to the Product to sell and/or market the Product[.]" The agreement also contains a termination clause, which provides that each party has the right to terminate the agreement "at any time for a breach of this Agreement and the failure to cure such breach within ten (10) days after written notice of such breach by a party."

{¶ 14} Phillips testified that 180 purchased CytoDetox from Metron for $13 to $15 per bottle. He did not dispute that 180 sold CytoDetox to practitioners for roughly $45 per bottle and directly to consumers at roughly $84 per bottle. He explained that 180 would offer a lower price per bottle depending on the volume of the purchase.

{¶ 15} Phillips testified that on December 23, 2015, Metron sent a letter to him that 180 had breached the distribution agreement by selling CytoDetox to nonpractitioners. He testified that he sent a letter in response disputing the claim but assuring Dr. Tsirikos-Karapanos that 180 had modified its website to clarify that only practitioners were authorized to purchase CytoDetox.

{¶ 16} Dr. Tsirikos-Karapanos and Phillips testified that on April 21, 2016, Metron and 180 executed an amendment to the distribution agreement. Dr. Tsirikos-Karapanos explained that the amendment "waived" the minimum amount of product that 180 was required to sell to maintain exclusivity in 2015. Phillips testified that Metron was having financial challenges and offered a "better rate" to sell "extra inventory" with a lower concentration of HCF. He explained the amendment was "mutually beneficial" to both parties.

{¶ 17} Phillips testified that in July 2016, he had a phone call with Dr. Tsirikos-Karapanos about selling a product to nonpractitioners. He said that he offered to purchase more CytoDetox and make it available for the public to purchase, and Dr. Tsirikos-Karapanos told him that was a "great idea" and to "sell as much as you can." Dr. Tsirikos-Karapanos denied having this phone call with Phillips.

{¶ 18} Phillips testified that on December 29, 2016, Metron sent 180 a "Notice of Breach" letter, which was admitted into evidence. The letter identifies two violations to the distribution agreement: the sale of CytoDetox to nonpractitioners and the sale of CytoDetox outside of the United States. Phillips testified that he was surprised to receive Dr. Tsirikos-Karapanos's letter, but Metron and 180 resolved the dispute by executing a second amendment to the distribution agreement. The amendment includes a release in which Metron agreed to waive any claims it had against 180 arising from 180's "unauthorized retail sales" of CytoDetox to nonpractitioners and to customers outside of the United States.

{¶19} Phillips testified that in early 2017, he had "calls all the time" with Dr. Tsirikos-Karapanos and that Dr Tsirikos-Karapanos gave him permission to distribute CytoDetox outside of the United States. Phillips admitted that he did not get this authorization in writing...