Acumed LLC v. Advanced Surgical Services, Inc.

• Citation: 561 F.3d 199
• Decision Date: 20 March 2009
• Docket Number: No. 07-2562.,No. 07-1869.,07-1869.,07-2562.
• Parties: ACUMED LLC, A Delaware Limited Liability Corporation; Surgical Resources of Pennsylvania, Inc. v. ADVANCED SURGICAL SERVICES, INC.; Robert Morris, an Individual, Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

561 F.3d 199

ACUMED LLC, A Delaware Limited Liability Corporation; Surgical Resources of Pennsylvania, Inc. v. ADVANCED SURGICAL SERVICES, INC.; Robert Morris, an Individual, Appellants.

No. 07-1869.

No. 07-2562.

United States Court of Appeals, Third Circuit.

Argued: December 2, 2008.

Filed: March 20, 2009.

Michael L. Eidel (argued), Erin L. Ginsburg, DLA Piper, Philadelphia, PA, Bruce W. McCullough (argued), McCullough & McKenty, Wilmington, DE, Attorneys for Appellees.

Gary Green (argued), Sidkoff, Pincus & Green, Philadelphia, PA, Attorneys for Appellants.

Before: AMBRO and GREENBERG, Circuit Judges, and RODRIGUEZ,^* District Judge.

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. INTRODUCTION

This matter comes on before this Court on an appeal from a final order entered in the District Court on May 21, 2007, accompanying an opinion dated May 18, 2007, as well as from a separate judgment for compensatory and punitive damages in this case involving claims and counterclaims among parties in the surgical implant business. See Acumed LLC v. Advanced Surgical Servs., Inc., Civ. No. 05-2711, 2007 WL 1500051 (E.D.Pa. May 18, 2007). The District Court entered the order and judgment from which appellants, Advanced Surgical Services, Inc. ("Advanced") and Robert C. Morris ("Morris"), have taken their appeal, in favor of appellees Acumed LLC ("Acumed") and Surgical Resources of Pennsylvania, Inc. ("Surgical").¹ Inasmuch as Morris is the president and sole owner of Advanced, as a matter of convenience we usually refer to appellants singularly as "appellant." In addition, appellant filed an earlier appeal from a March 22, 2007 order holding it in contempt of court and ordering it to pay a counsel fee that appellant characterizes as a fine. The clerk of this Court consolidated the appeals by order of May 31, 2007, and we address both in this opinion. The May 21, 2007 order, as well as providing for damages, entered an injunction against appellant and denied its post-trial motions in which it sought a judgment as a matter of law under Fed.R.Civ.P. 50(b) or, in the alternative, an order amending the judgment and a remittur of damages, a new trial, and orders assessing attorneys' fees and sanctions against appellees.

Appellant challenges (1) the denial of its motion for judgment as a matter of law on appellees' claims; (2) the award of damages, particularly punitive damages, against it; (3) the grant of partial summary judgment in favor of appellees on appellant's counterclaim for abuse of process, unfair competition, and defamation; (4) the grant of a judgment as a matter of law in favor of appellees on appellant's counterclaim for tortious interference with contractual relationships; (5) certain of the District Court's evidentiary rulings; (6) the denial of appellant's application for attorneys' fees; (7) the grant of injunctive relief against it; and (8) the order holding appellant in contempt of court.² Though both appellees prevailed only in certain aspects of this case, neither cross-appeals from any disposition in the District Court adverse to it.

For the reasons we discuss below, we conclude that the application of legal principles required the District Court to have granted appellant's post-trial Rule 50(b) motion seeking to set aside the jury's verdict in favor of appellees on a tortious interference with contractual relationship claim that appellees pled against appellant and attempted to prove at trial.³ Therefore, we will reverse the District Court's determination that appellant was not entitled to judgment as a matter of law on that claim and reverse, as well, the judgment for compensatory and punitive damages, as the jury predicated the damages verdict solely on the tortious interference claim. Furthermore, we will reverse the order for the injunction against appellant inasmuch as the District Court predicated the injunction on the jury's liability finding on the tortious inference claim, but we will affirm all of the District Court's remaining orders. Inasmuch as we are not remanding the case for a new trial or other proceedings, our disposition on this appeal will bring this litigation to a close.

II. BACKGROUND

A. Facts

To the extent that appellant challenges the order granting partial summary judgment against it, we state the facts most favorably to it, but to the extent that the appeal challenges the jury's verdict, we state the facts on any disputed issue most consistently with the verdict. See Johnson v. Campbell, 332 F.3d 199, 204 (3d Cir. 2003).

Acumed is a manufacturer of surgical implants and related devices, and appellant and Surgical are in the business of distributing surgical implants and other medical devices for various manufacturers, including Acumed, to hospitals and surgeons. Acumed and Morris began a relationship in 1996 when Joe Richioni, then Acumed's authorized sales representative for eastern Pennsylvania, retained Morris as an independent contractor to sell Acumed's products. In 1998, due to Acumed's dissatisfaction with Richioni's performance, Morris and two other individuals formed a "loose partnership" called RMW Orthopedics ("RMW") that contracted with Acumed to take over Richioni's territory.⁴ App. at 2955. At that time Acumed and RMW signed a Manufacturer's Representative Agreement ("RMW Agreement") designating RMW as Acumed's exclusive representative for its products in eastern Pennsylvania. Morris became Acumed's authorized representative for the greater Philadelphia area. The RMW Agreement contained a provision that prevented RMW from making unauthorized disclosure of Acumed's confidential information. The non-disclosure provision provided for the award of attorney's fees to the prevailing party in the event of litigation related to the provision.

In late 1999, its "loose partners" dissolved RMW, following which Acumed contracted with Morris's company, Advanced, for it to become Acumed's exclusive sales representative in southeastern Pennsylvania. Appellant and Acumed differ, however, on the nature of their sales representative agreement. Ordinarily the written terms of an agreement should be clear, though their meaning may be in dispute, but the situation here varies from the ordinary because Acumed presented evidence explaining the terms of its agreement with Advanced, but did not produce a written contract between Advanced and Acumed. For its part, appellant produced a contract purportedly evidencing the agreement Advanced and Acumed reached, but neither party had signed that version of the contract, and the parties' versions of the agreement significantly varied. Nevertheless, we will refer to the agreement, as uncertain as its terms may be, between Advanced and Acumed as the "Advanced-Acumed Agreement."

Throughout the trial and this appeal, Acumed has maintained that Advanced was its commissioned sales representative under an agreement identical to the earlier RMW Agreement, and, in that capacity, placed orders from surgeons and hospitals with Acumed, who then shipped the product directly to its purchaser. Nevertheless, even as a sales representative appellant may have had Acumed's products on hand as consignment inventory for direct delivery to an ordering surgeon or hospital. In any event, regardless of how appellant or Acumed filled the order, when a purchaser paid Acumed on an invoice for a sale that appellant had obtained, Acumed paid appellant a commission.

In contrast to Acumed's version of their contractual relationship, appellant argued and still argues that its contract with Acumed was a "hybrid" agreement under which it acted both as a sales representative and a stocking distributor. Appellant contended that in its role as a stocking distributor, it purchased products directly from Acumed for resale to hospitals or surgeons. Appellant further alleged that under the terms of the Advanced-Acumed Agreement, if Acumed terminated the agreement, Acumed would pay a "buy-out" fee to appellant. Appellant explains that it sought "buy-out" fees from the manufacturers it represented to compensate it for its expenses in promoting a manufacturer's product if the manufacturer terminated appellant as a representative and thereby deprived appellant of the opportunity to earn further commissions on the sales of the manufacturer's products. Appellant believed that when a manufacturer terminated its distributorship it should pay appellant such a fee, inasmuch as appellant would have promoted the manufacturer's products while representing the manufacturer and there could be further sales of a manufacturer's products attributable to appellant's efforts after a manufacturer terminated appellant as a sales representative. It appears that sometimes a buy-out fee became payable when another company acquired the manufacturer that appellant had represented and appellant then lost the account. Indeed, appellant sets forth in its brief that Acumed "was bought out by a conglomerate in around 2000." Appellant's br. at 11 n. 4.⁵

In January 2000, during the time of the Advanced-Acumed relationship, appellant sometimes bought Acumed products under the name Allied Surgical ("Allied"), an unincorporated entity not to be confused with appellee Surgical Resources of Pennsylvania or appellant Advanced Surgical Services. Appellant contended that it formed Allied so that it could sell products in hospitals that had not approved Acumed as a vendor. On the other hand, Acumed contended that it believed during the Advanced-Acumed relationship that Allied was an entity separate from and independent of appellant. Moreover, it contended that Morris formed Allied in order to purchase Acumed products secretly for resale on his own account to hospitals and surgeons.

In January 2001, Acumed, citing what it believed was appellant's poor sales performance, terminated the Advanced-Acumed Agreement. Morris testified that after the termination of the contract he returned the inventory that ap...