Eclipse Medical v. American Hydro-Surgical

• Decision Date: 20 January 1999
• Docket Number: No. 96-8532-CIV.,96-8532-CIV.
• Citation: 262 F.Supp.2d 1334
• Parties: ECLIPSE MEDICAL, INC., a Texas corporation and Horizon Medical Technologies, Inc., a Washington corporation; Plaintiffs, v. AMERICAN HYDRO-SURGICAL INSTRUMENTS, INC., a Maryland corporation; Davol Inc., a Delaware corporation; C.R. Bard, Inc., a New Jersey corporation, Defendants.
• Court: U.S. District Court — Southern District of Florida

262 F.Supp.2d 1334

ECLIPSE MEDICAL, INC., a Texas corporation and Horizon Medical Technologies, Inc., a Washington corporation; Plaintiffs, v. AMERICAN HYDRO-SURGICAL INSTRUMENTS, INC., a Maryland corporation; Davol Inc., a Delaware corporation; C.R. Bard, Inc., a New Jersey corporation, Defendants.

No. 96-8532-CIV.

United States District Court, S.D. Florida.

January 20, 1999.

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James Ragen, Ragen & Cromwell, Seattle, WA, Peter A. Sachs, Jones Foster Johnston & Stubbs, West Palm Beach, FL, for Plaintiffs.

Robert Brochin, Scott Dimond, Morgan Lewis & Bockius, Miami, FL, for Defendants.

ORDER GRANTING DEFENDANTS' SECOND MOTION FOE PARTIAL SUMMARY JUDGMENT

RYSKAMP, District Judge.

I. INTRODUCTION

THIS CAUSE came before the Court upon the Second Motion for Summary Judgment (the "Motion") of Defendants American Hydro-Surgical Instruments, Inc. ("AHSI"), Davol Inc. ("Davol"), knd C.R. Bard, Inc. ("Bard") (collectively, the "Suppliers"), seeking 1) final summary judgment under Fed.R.Civ. P. 56(a) on seven of the nine counts brought against the Suppliers by Plaintiffs Eclipse Medical, Inc. ("Eclipse") and Horizon Medical Technologies, Inc. ("Horizon") (collectively, the "Distributors"), 2) partial summary judgment under Fed.R.Civ.P. 56(b) on the Distributors' two remaining counts and 3) final summary judgment under Fed.R.Civ.P. 56(a) on the counterclaims brought by AHSI and Davol against the Distributors. [DE-154] The Distributors' filed a memorandum in opposition to the Motion (the "Response") to which the Suppliers filed a reply. This Court heard argument on the Motion on December 18,1998.

II. BACKGROUND

This is an action brought by two medical supply distributors against one of their suppliers and two affiliated entities, alleging breaches of contract, fraudulent inducement, breach of fiduciary duties, promissory estoppel, tortious interference with business relationships, and violations of two Florida consumer protection statutes. AHSI entered into a distribution agreement with Eclipse Medical, Inc. ("Eclipse") on November 1, 1994 and with Horizon Medical Technologies, Inc. ("Horizon") on December 23, 1994 (the two distribution agreements are identical with regard to the provisions that are the subject of the Motion, and are collectively referred to as the "Agreement"). The parties agree that the Agreement is a valid and binding contract. The Agreement granted Eclipse and Horizon the right to purchase from AHSI and then market and re-sell certain laproscopic irrigation medical equipment, which is specifically defined in the Agreement (the "Products"). The Agreement further provided that the grant of marketing and sales rights was applicable only within each Distributor's prescribed Territory, as specifically defined in the Agreement.

The Agreement contained two specific provisions relating to its duration. The first, Section 3, deals with the "term" of the Agreement, and reads as follows:

This Agreement shall remain in effect for a term commencing on the date of this Agreement and ending on December 31, 1995 (the "Term"), subject to the renewal provisions of Section 4 and the termination provisions of Section 20.

The second provision relating to the duration of the Agreement is found. Section 4, and reads as follows:

If this Agreement is still in full force., and effect at the end of the Term; it shall be automatically renewed at that time for an additional one-year period, (the "Renewal Term"), unless terminated pursuant to Section 20. Except as otherwise specifically provided, the Renewal Term shall be on the same terms and conditions as the Term.

On December 31, 1996, the Court granted the Suppliers' first Motion for Partial Summary Judgment by ruling that the foregoing language regarding the Agreement's term is clear and unambiguous, and that, as a matter of law, the parties' Agreement expired on December 31, 1996. While this Court certified that ruling for immediate interlocutory appeal, the Distributors failed to timely appeal the order.

The Agreement also contained a comprehensive merger clause. At paragraph 33 the Agreement provides that "this Agreement reflects the entire agreement between the parties and cancels all prior agreements and commitments, verbal or written, between the parties." At paragraph 34 the Agreement provides that "this Agreement may not be modified or amended except in a writing signed by both parties." Finally, the Agreement discusses the nature of the parties' relationship. The Agreement provides in the fifth paragraph that the parties "are not joint venturers, partners, or agents of each other," and Recital B of the Agreement provides that "the parties intend that their relationship be that of independent contractors."

The Plaintiffs have throughout this litigation maintained that the Agreements, by their own language, renew annually assuming that the Distributors meet their purchase quotas. They claim that during their contract negotiations. AHSI's Philip Bambino, who negotiated the Agreements, with the Distributors oh behalf of AHSI, told them that their contracts would renew annually as long as they met their quotas. The principals of each of the Distributors, Tim Wynne ("Wynne") of Horizon, and Tom O'Brien ("O'Brien") of Eclipse believed at the time of execution of the Agreement—and allegedly believe to this day—that their Agreement specifically provided that it was to be perpetually renewing, annually, subject to the Plaintiffs achieving their sales quotas. They further claim that it was Bambino's promise of a "long-lasting partnership" that induced them to execute the Agreements.

Plaintiffs also allege the existence of programs initiated by AHSI in response to competitive market pressure which were collectively known as the "On Loan Program." Under the On Loan Program, both AHSI and the Distributors contributed to the cost of certain capital equipment that was provided free of charge to the Distributors' hospital customers. The hospitals were allowed to keep this equipment in exchange for executing price protection agreements whereby the hospitals would purchase Products from the Distributors at pre-set prices. These agreements were entered into between the hospitals and the Distributors, and the vast majority of those executed by Eclipse and Horizon contained provisions allowing for their termination by either 30 or 60 day notice. However, as long as the hospitals purchased the disposable Products," they were entitled to maintain possession of the capital equipment provided to them free of charge. While the Distributors contribute to the cost of equipment and entered into price protection agreements with hospitals even before the execution of the Agreement, the final version of the On Loan Program was allegedly formalized by AHSI'S March 1995 "On Loan. Memorandum."

Plaintiffs" claim that the On Loan Program was a "partnership," primarily because AHSI and the Distributors "shared" in the cost of the equipment that was loaned to the hospitals. While the Distributors claim that they were partners with AHSI, however, it is undisputed that the parties never agreed to—and never did— share in profits or losses with one another, or indeed exchange profitability information. Nor did the Distributors file partnership tax returns.

Plaintiffs claim that, as with the Agreement itself, they were fraudulently induced into the On Loan Program by Bambino. Bambino allegedly told the Distributors that by participating in the program— which allegedly represented a modification of the Agreement—they would guarantee that AHSI would supply them with Product for the duration of any price protection agreement they entered. Moreover, the Distributors allege that their right to purchase and re-sell Products under the On Loan Program was not contingent upon their achieving any purchase quotas. They allegedly base this belief, again, on representations to this effect made to them by Bambino. Wynne claims Bambino made such representations to him prior to entering in to the Agreement, and O'Brien claims that these representations were made to him after Eclipse signed the Agreement but before the On Loan Memorandum was released.

In October 1995, AHSI was acquired by Bard, which merged AHSI for operations purposes' With Bard subsidiary Davol (the "Merger"), Prior to that time, Davol had been a competitor of AHSI in the laproscopic suction irrigation market. The Merger allowed Davol access to AHSI's Products, which were considered by the parties to be superior to the products offered by AHSI's competitors. The Distributors claim that following the Merger, Davol began to sell Products directly to hospitals within the Distributors' exclusive territories in violation of the Agreement and allegedly in derogation Davol's common law duties to avoid unjustified interference with the relationships between the Distributors and their customers.

The Suppliers allege that following the expiration of the Agreement on December 31, 1996, both Eclipse and Horizon failed to pay the Suppliers for products purchased under the Agreement, leaving outstanding balances of $99,017 and $75,427, respectively. The Suppliers have asserted counterclaims for breach of contract seeking these amounts, plus prejudgment interest and attorney's fees.

III. STANDARD FOR SUMMARY JUDGMENT

"Summary judgment is proper if the pleadings, depositions, and affidavits show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Swain v. Hillsborough County Sch. Bd., 146 F.3d 855, 857 (11the Cir.1998). See Fed.R.Civ.P. 56(c). See also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). "To defeat a motion for summary judgment, the nonmoving party may not rely on `mere allegations' [but] must raise `significant probative evidence' that would be...