Bowman v. Dentsply Sirona, Inc.
| Decision Date | 23 March 2023 |
| Docket Number | 1:22-cv-191 |
| Parties | JAY S. BOWMAN, Plaintiff, v. DENTSPLY SIRONA, INC., Defendant. |
| Court | U.S. District Court — Western District of Michigan |
Hon Paul L. Maloney
REPORT AND RECOMMENDATION
This matter is before the Court on Plaintiff's Motion to Dismiss and Motion to Strike. (ECF No. 23). Plaintiff (Bowman) initiated this action asserting various state law claims. (ECF No. 1). Defendant (Dentsply) asserted several affirmative defenses as well as a counterclaim. (ECF No. 22). Bowman now moves to dismiss Dentsply's counterclaim and one of its affirmative defenses. Pursuant to 28 U.S.C. § 636(b)(1)(B), the undersigned recommends that Plaintiff's motion be granted in part and denied in part.
Bowman alleges the following in his complaint. Bowman, “an orthodontist of worldwide renown,” is “an orthodontics innovator, educator, and trend-setter.” On an unspecified date, Bowman met John Bozman, Jr., at a trade show. Bowman related that he “had several product ideas that he wished to coordinate producing with a manufacturer.” Bozman introduced Bowman to his father John Bozman, Sr., President of Glenroe Technologies, Inc.
Bowman shared with the Bozmans “several of his product ideas,” after which the parties “orally agreed” that Glenroe would produce and sell Bowman's products in return for a ten-percent royalty on their gross sales. The parties operated pursuant to this oral agreement from 2002-2005. In 2005, the parties executed a written agreement. Pursuant to this agreement, Bowman would be paid a ten-percent royalty fee on sales of products utilizing Bowman's “intellectual property.” The agreement also provided that Bowman would act as a paid consultant to Glenroe.
The Bozmans later sold Glenroe to Dentsply International, Inc. Bowman and Dentsply International executed updated agreements in 2006 and 2009, which, in relevant part, called for Bowman to be paid royalties on sales of products incorporating his intellectual property. Bowman subsequently provided to Dentsply International “many very successful product ideas” that generated “millions of dollars of revenue annually.”
In 2016, Sirona Dental Systems, Inc., merged with Dentsply International, Inc., to become Dentsply Sirona (Dentsply). Dentsply “assumed all of the contracts and other obligations of Dentsply International, Inc.,” and continued to make royalty payments to Bowman. In July 2021, Dentsply informed Bowman that it would discontinue making royalty payments to Bowman because Dentsply “did not know for certain whether Dr. Bowman in fact generated the ideas for the products he had been paid for.” Dentsply was unable, however, “to supply any reason, rationale, or evidence” in support of its position.
The following month, Dentsply made a royalty payment to Bowman who considered the matter “resolved.” On October 4, 2021, however, Dentsply informed Bowman that he was no longer entitled to receive royalty payments “because he had not obtained a patent on the product concepts that he provided and marketed to Dentsply.” Dentsply subsequently modified its position, asserting that Bowman was not entitled to royalty payments because their agreements were “forward looking only and no payment was due for concepts that had been submitted prior to the 2009 contract.” Dentsply subsequently failed to make its 2022 first quarter royalty payment to Bowman as required by their agreement.
On March 3, 2022, Bowman initiated the present action asserting six claims for relief: (1) breach of contract; (2) equitable accounting; (3) unjust enrichment; (4) promissory estoppel; (5) conversion; and (6) declaratory judgment. Bowman's equitable accounting and conversion claims were subsequently dismissed. (ECF No. 21). Dentsply subsequently asserted a counterclaim for unjust enrichment as well as several affirmative defenses, including fraud. (ECF No. 22). Bowman now moves to dismiss Dentsply's counterclaim and to strike its affirmative defense of fraud. Dentsply has responded to the motion. The Court finds that oral argument is unnecessary. See W.D. Mich. LCivR 7.2(d).
Dentsply has asserted a counterclaim for unjust enrichment which Bowman now moves the Court to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). A Rule 12(b)(6) motion to dismiss for failure to state a claim on which relief may be granted tests the legal sufficiency of a complaint by evaluating the assertions therein in a light most favorable to Plaintiff to determine whether such states a valid claim for relief. See In re NM Holdings Co., LLC, 622 F.3d 613, 618 (6th Cir. 2000).
Pursuant to Federal Rule of Civil Procedure 12(b)(6), a claim must be dismissed for failure to state a claim on which relief may be granted unless the “[f]actual allegations [are] enough to raise a right for relief above the speculative level on the assumption that all of the complaint's allegations are true.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007).
As the Supreme Court more recently held, to survive a motion to dismiss, a complaint must contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009). This plausibility standard “is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” If the complaint simply pleads facts that are “merely consistent with” a defendant's liability, it “stops short of the line between possibility and plausibility of ‘entitlement to relief.'” Id. As the Court further observed:
Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. . .Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. . .Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the wellpleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not “show[n]” - “that the pleader is entitled to relief.”
Id. at 678-79 (internal citations omitted).
As the Court has previously observed, the Court has jurisdiction over this matter based on diversity and Michigan law governs the substance of the parties' claims. (ECF No. 21 at PageID.160-61). Bowman argues that Dentsply's counterclaim is subject to dismissal for three reasons: (1) it is barred by the statute of limitations; (2) it is barred by the doctrine of laches; and (3) it is inconsistent with Dentsply's assertion that there exists a contract covering the same subject matter.
Unjust enrichment is a claim sounding in equity. See, e.g., Wright v. Genesee County, 934 N.W.2d 805, 809 (Mich. 2019). Under Michigan law, “statutes of limitation may apply by analogy to equitable claims.” Taxpayers Allied for Constitutional Taxation v. Wayne County, 537 N.W.2d 596, 600 n.9 (Mich. 1995). But determining precisely what the statute of limitations is for Dentsply's unjust enrichment claim is less obvious.
In Huhtala v. Travelers Ins. Co., 257 N.W.2d 640 (Mich. 1977), Bonnie Cummings was injured in an automobile accident. Id. at 642. The owner of the automobile in which Cummings was riding was insured by Travelers. More than three years later, Cummings and her father, Arne Huhtala, sued Travelers and one of its claims managers. The plaintiffs asserted claims for promissory estoppel, alleging that Travelers “had promised the plaintiffs that a full and equitable settlement would be paid after Cummings' physical condition stabilized.” Ibid.
The defendants moved for relief on the ground that the plaintiffs' claims were barred by the statute of limitations. Id. at 643. The trial court and the Michigan Court of Appeals both agreed with Travelers that the plaintiffs' claims were not timely filed. Id. at 641. The Michigan Supreme Court reversed, finding that the plaintiffs' claims were subject to a six-year statute of limitations. Id. at 644 .
As Bowman observes, however, courts interpreting Huhtala regarding the limitations period applicable to claims for unjust enrichment have not arrived at consistent results. For example, in In re Pratt, 2016 WL 9777358 (W.D Mich., Jan. 29, 2016), the court, relying on Huhtala, concluded that claims of unjust enrichment are subject to a three-year statute of limitations. Id. at *3. On the other hand, the Michigan Court of Appeals has found that “[b]ecause claims of promissory estoppel and unjust enrichment are dependent on the existence of contract or contract principles,” they are subject to a six-year limitation period. Dixon-Brown v. Covenant Cemetery Services, 2022 WL 413904 at *2 (Mich. Ct. App., Feb. 10,...
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