Depuy Synthes Sales, Inc. v. Jones

• Decision Date: 21 March 2014
• Docket Number: Civil. No. 2:13cv392
• Citation: Depuy Synthes Sales, Inc. v. Jones, Civil. No. 2:13cv392 (E.D. Va. Mar 21, 2014)
• Parties: DEPUY SYNTHES SALES, INC., Plaintiff, v. MICHAEL JONES, JACOB SCHOOLS, and SKY SURGICAL, INC., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

DEPUY SYNTHES SALES, INC., Plaintiff, v. MICHAEL JONES, JACOB SCHOOLS, and SKY SURGICAL, INC., Defendants.

Civil. No. 2:13cv392

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF VIRGINIA Norfolk Division

March 21, 2014

OPINION and ORDER

This matter is currently before the Court on two motions to dismiss Counts III and IV of the complaint for failure to state a claim, one filed by corporate defendantSky Surgical, Inc.("Sky Surgical"), and one filed collectively by Michael Jones("Jones") and Jacob Schools ("Schools").¹This Court previously referred such motions to a United States Magistrate Judge, pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B) for report and recommendation.The Magistrate Judge assigned to this case held a hearing and thereafter issued a detailed Report and Recommendation ("R&R") recommending that the pending motions be DENIED in their entirety.Sky Surgical thereafter filed objections to the R&R, and defendants Jones and Schools filed collective objections to the R&R.PlaintiffDePuy Synthes Sales, Inc.("Plaintiff") filed a response to such objections, but did not itself object to the R&R.

After carefully considering the Magistrate Judge's thorough R&R, the parties' subsequent filings, and the relevant law, this Court hereby ADOPTS and APPROVES the findings and recommendations set forth in the R&R.The instant Opinion supplements the R&R in order to address Defendants' objections and the Virginia Supreme Court's recent opinion in Dunlap v. Cottman Transmission Systems, LLC, --Va.--, 754 S.E.2d 313(2014).

I.FACTUAL AND PROCEDURAL HISTORY

The parties have not filed objections challenging the accuracy of the factual and procedural background as detailed in the R&R.R&R 2-5, ECF No. 21.Upon review of the R&R and record, this Court finds no clear error in the R&R as to such matters, and thus, hereby adopts and incorporates such background herein.

Subsequent to the issuance of the R&R, Defendants filed objections to the R&R challenging the Magistrate Judge's interpretation of Virginia law and his application of such law to the facts of this case.Plaintiff filed a brief responding to such objections, arguing in favor of the Magistrate Judge's position.Subsequent to the issuance of the R&R and the filing of the parties' briefs, the Supreme Court of Virginia issued its opinion in Dunlap.As discussed in greater detail below, the ruling in Dunlap isconsistent with, and lends additional support to, the Magistrate Judge's thorough and well-reasoned analysis.

II.STANDARD OF REVIEW

The well-established standard of review governing motions to dismiss filed pursuant to Rule 12(b)(6) is accurately set forth in the R&R and is not objected to by the parties.Accordingly, this Court incorporates such standard herein.

As to the review procedure for an R&R, "any party may serve and file written objections" to the proposed findings and recommendations set forth in the R&R within fourteen (14) days after service of the R&R. 28 U.S.C. § 636(b)(1)."The Federal Magistrates Act requires a district court to 'make a de novo determination of those portions of the [magistrate judge's] report or specified proposed findings or recommendations to which objection is made.'"Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310, 315(4th Cir.2005)(quoting28 U.S.C. § 636(b)(1))(alteration in original) .As to those portions of the R&R that no party has challenged through advancing a " 'specific written objection,'[a]district court[is] free to adopt [the] magistrate judge's recommendation . . . without conducting a de novo review."Id. at 316.As to these unchallenged portions, the reviewing court need only "'satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.'"Id. at 315(quotingFed. R. Civ. P. 72Advisory Committee's Note).

III.DISCUSSION

A. Unobjected-to Portions of R&R

Having reviewed the Magistrate Judge's detailed R&R, relevant case law, and the relevant portions of the record, this Court is satisfied that there is no clear error as to all portions of the R&R that were not specifically objected to by the parties.Diamond, 416 F.3d at 315.Accordingly, this Court hereby ADOPTS the findings and recommendations set forth in the R&R as to all unobjected-to matters.

B.Objections to the R&R

Defendants' objections to the R&R appear to include both specific objections warranting a de novo review, and broader conclusory objections contending that the Magistrate Judge erred, but not explaining the purported error.Because, in the end, Defendants' collective objections to the R&R are specific enough to challenge the bulk of the Magistrate Judge's legal reasoning, this Court fashions the instant Opinion in a manner that directly addresses the primary legal issues in dispute, rather than attempting to address each individually numbered objection in Defendants' filings.Stated differently, this Court has conducted a de novo review of the analysis set forth on pages 7-22 of the R&R.Having conducted such de novo review, this Court adopts and incorporates herein the entirety of the Magistrate Judge's analysis as the Defendants' objections are not well-founded.Moreover, the Virginia Supreme Court's recent opinion in Dunlap only buttressesthe Magistrate Judge's analysis, and lends further support for the denial of the two pending motions to dismiss.Dunlap, 754 S.E.2d at 316-17, 319.

1.Count III

Count III of the complaint alleges that Sky Surgical tortiously interfered with employment contracts that Jones and Schools each entered into with Plaintiff, their former employer.Sky Surgical and Plaintiff are direct competitors, and Jones' and Schools' employment contracts with Plaintiff include non-compete, non-disclosure, and non-solicitation clauses.According to the allegations in the complaint, which this Court is required to accept as true at this stage in the case, Sky Surgical was on notice of such employment contracts.Sky Surgical nevertheless hired Jones and Schools shortly after they stopped working for Plaintiff and employed them in a manner that directly competed with Plaintiff in the same geographical area where they had previously worked for Plaintiff.Although the analysis in the R&R is detailed, distilled to its essence, the R&R concludes that Count III states a claim against Sky Surgical because: (1)Plaintiff is not required under Virginia law to allege tortious interference with contract through the use of "improper methods" since the employment contracts at issue included post-employment clauses that were not "terminable at will"; and (2) drawing all reasonable inferences in Plaintiff's favor, sufficient facts are included in the complaint to plausibly allege that SkySurgical knew of the existence of the employment contracts, and tortiously interfered with them.

Sky Surgical's objections to the R&R's analysis of Count III contend that: (1) the only duties at issue in this case arise from contracts, and there being no "source of duty" outside of such contracts, this Court should not allow Plaintiff to convert breach of contract claims into tort claims; and (2)the Court should look behind Plaintiff's employment contracts with Jones and Schools to the purported "real interests at stake," which Sky Surgical contends are the contracts between Plaintiff and its customers, and because Plaintiff's customer contracts are "terminable at will," Count III should be dismissed based on Plaintiff's failure to allege the use of "improper methods or means" to interfere with such terminable at will contracts.Having fully considered Sky Surgical's objections to the R&R, this Court adopts, without restating, the Magistrate Judge's analysis of both the relevant law and the sufficiency of the allegations in the complaint.

a. Source of Duty

Supplementing the analysis in the R&R in response to Sky Surgical's objections, first, this Court rejects Sky Surgical's contention that the only "source of duty" at issue in this case is contractual, because: (1) Virginia law has long-recognized that interference with a contract by a third-party competitor is a tort, not a contract claim, Chaves v. Johnson, 230 Va. 112, 121, 335 S.E.2d97, 103(1985), seeDunlap, 754 S.E.2d at 319(indicating that "tortious interference with contract . . . [is an]intentional tort[] predicated on the common law duty to refrain from interfering with another's contractual and business relationship[]" and "[t]hat duty does not arise from the contract itself but is, instead, a common law corollary of the contract"(citingWyatt v. McDermott, 283 Va. 685, 693, 725 S.E.2d 555, 558(2012)))(emphasis added); and (2) Sky Surgical is not a party to the employment contracts at issue, and thus, its purported interference with such contracts is a quintessential example of tortious interference by a third party.Accordingly, it is clear that duties arising outside of the employment contracts are squarely at issue in this case.

b. Improper Methods or Means

Second, the objections to the analysis in the R&R, regarding whether "improper methods or means" must be pled by Plaintiff, are rejected.The parties do not dispute the fact that a cause of action for tortious interference with contract has four elements when the contracts at issue are not terminable at will, but that a fifth element, the use of "improper methods or means," must be pled and proven when the contracts at issue are terminable at will.Duggin v. Adams, 234 Va. 221, 226-27, 360 S.E.2d 832, 836(1987).Such additional element reflects the fact that while a party to a contract generally has "property rights in the performance" of such contract, as well as anticipated profits therefrom, a party's "interest in acontract terminable at will is essentially only an expectancy of future economic gain, and he has no legal assurance that he will realize the expected gain."Id. at 225-26, 360 S.E.2d at 835-36.Viewed from a slightly different perspective,...