Encore Med., L.P. v. Kennedy
| Decision Date | 05 March 2013 |
| Docket Number | CIVIL ACTION NO. 3:12-58 |
| Parties | ENCORE MEDICAL, L.P., Plaintiff/Counterclaim Defendant, v. JAY KENNEDY, D.C., Defendant/Counterclaimant, v. GEOFFREY MISCOE; MIR-COM PRODUCTS, L.L.C.; BRYANNE ENTERPRISES, INC.; and MIG RUNNER, L.L.C., a/k/a MRP, Defendants. |
| Court | U.S. District Court — Western District of Pennsylvania |
MEMORANDUM OPINION AND ORDER OF COURT
This matter comes before the Court on a motion to vacate filed by the Defendant/Counterclaimant, a motion to dismiss filed by the Plaintiff, and motions for summary judgment filed by the Plaintiff, Defendant/Counterclaimant and remaining Defendants. ECF Nos. 12, 65, 88, 91 & 94. For the reasons that follow, the motion to vacate (ECF No. 12) will be granted in part and denied in part. The motion to dismiss (ECF No. 65) will be granted. The Plaintiff's motion for partial summary judgment (ECF No. 94) will be denied. The Defendants' motions for summary judgment (ECF Nos. 88 & 91) will be granted in part and denied in part. In accordance with this Court's order of April 12, 2012, a status conference will be scheduled within twenty-one days of the issuance of this opinion, and the parties will be afforded an opportunity to explain whether "limited additional discovery" is needed. ECF No. 86 at 2.
The Court has subject-matter jurisdiction over the present dispute pursuant to 28 U.S.C. § 1332(a)(1). Venue is proper under 28 U.S.C. § 1391(b).
Plaintiff Encore Medical, L.P. ("Encore"), is a limited partnership organized under the laws of Delaware. ECF Nos. 95 & 98 at ¶ 1. Encore maintains its principal place of business in Austin, Texas. Id. The Chattanooga Group was founded in 1947. Id. at ¶ 3. At that time, the Chattanooga Group maintained a facility in Hixson, Tennessee, to manufacture orthopedic rehabilitation equipment. Id. at ¶ 5. The Chattanooga Group ultimately became the world's largest manufacturer of equipment designed to treat skeletal, muscular, neurological and soft tissue disorders. Id. at ¶ 2. Encore purchased the Chattanooga Group in 2002, thereby making the Chattanooga Group a division of Encore. Id. at ¶¶ 2, 4. The facility in Hixson closed in 2010, when Encore started to manufacture its products in other locations. Id. at ¶¶ 5-6. Encore continues to sell products pertaining to rehabilitation, pain management and physical therapy throughout the world. Id. at ¶ 8. The products sold by Encore include chiropractic tables and traction/decompression systems. Id. at ¶ 7. In the United States, Encore's products are marketed and sold through a network of distributors. Id. at ¶ 9.
Chris Peetros ("Peetros") started working for the Chattanooga Group in 1995. Id. at ¶ 14. He became an Encore employee at the time of its acquisition of the Chattanooga Group. Id. Peetros' position apparently changed from that of National Sales Manager for the Chattanooga Group to Eastern Regional Sales Director for Encore. Id.
Dr. Jay Kennedy, D.C., is a licensed chiropractor who resides and practices in Berlin, Pennsylvania. Id. at ¶¶ 29-31. He owns and operates Back Pain Solutions Chiropractic, Inc. Id. at ¶ 32. Geoffrey Miscoe ("Miscoe") resides in Indian Lake, Pennsylvania. Id. at ¶ 33. Dr. Kennedy and Miscoe have been business associates for several years. Id. at ¶ 34.
Miscoe owns and operates Bryanne Enterprises, Inc. ("Bryanne"), Mir-Com Products, L.L.C. ("Mir-Com"), and Mig Runner, L.L.C. ("MRP"). Id. at ¶ 35. He and his wife, Lori Miscoe, are Bryanne's only shareholders. Id. at ¶ 40. Six other individuals are employed by Bryanne. Id. at ¶ 41. In 2001 or 2002, Bryanne became one of Encore's dealers for western Pennsylvania. Id. at ¶ 42. Miscoe handled Bryanne's dealings with Encore. Id. at ¶ 47. Mir-Com and MRP are limited liability companies maintaining their principal places of business in Central City, Pennsylvania. Id. at ¶¶ 48, 55. Miscoe is the only member of Mir-Com and MRP. Id. at ¶¶ 49, 57.
At some point in 2000 or 2001, Dr. Kennedy spoke with Peetros about their mutual interest in marketing and utilizing chiropractic products. Id. at ¶¶ 60-64. On June 25, 2002, Dr. Kennedy and Encore executed a written agreement providing for the marketing and sale of a "traction/decompression belting package" invented by Dr. Kennedy in connection with a "particular traction machine" supplied by Encore.1 ECF No. 1-1 at 36. The agreement was to continue for a minimum2 period of ten years, the first four of which were referred to as the "Base Term" and the remainder of which were referred to as the "Extended Term." Id. at 36-37. Pursuant to the terms of the agreement, Dr. Kennedy sold his interest in the belting package forthe sum of $5,000.00. Id. at 37. Encore agreed to pay Dr. Kennedy $18.00 for every unit of the belting package sold during the Base and Extended Terms. Id. Dr. Kennedy was also entitled to a "supplemental payment" for each unit of the traction machine sold with a belting package during the Base Term. Id. The supplemental payments were to equal $400.00 for each of the first 100 units sold in a given year of the Base Term and $500.00 for any excess units sold in the same year. Id. Encore had the option of terminating the Base Term in the event that it could not sell 100 units in a given year. Id. Dr. Kennedy agreed that "any and all inventions, improvements, trade secrets and know-how relating to traction machines . . . and accessories for traction machines . . . that [we]re conceived, made or developed by him" during the Base Term were to "belong exclusively to Encore." Id. (capitalization omitted). Any such "inventions, improvements, trade secrets [or] know-how" were to be disclosed to Encore "promptly upon creation." Id. Encore also acquired "the right to use and to allow others to use the name, likeness and biographical information of [Dr. Kennedy] for advertising and promotional purposes in connection with sales of the [traction machine] and [belting package]." Id. at 39. The agreement included a provision prohibiting Dr. Kennedy from participating in the "creation, development, manufacture, distribution or sale of any product" that was competitive with the traction machine or belting package in the United States during the term of the agreement and a period of two years following its expiration.3 Id.
By entering into the agreement, the parties acknowledged that the rights granted therein were "of a special and unique character," that they were of "peculiar value" to Encore, and that Encore would suffer "irreparable injury" in the event of a breach by Dr. Kennedy. Id. It was agreed that Encore would "be entitled to injunctive relief and other equitable relief or damages,in addition to any other rights and remedies available to it," if Dr. Kennedy were to contravene the terms of the agreement. Id. A separate provision provided that the agreement was to be "governed by the laws of the State of Tennessee and the United States of America." Id. at 40.
In April 2007, Bryanne started to market and sell seminars taught by Dr. Kennedy. Id. at ¶ 43. Encore terminated its business relationship with Bryanne in September 2008. ECF Nos. 95 & 98 at ¶ 116; ECF No. 97-1 at ¶ 54. Shortly thereafter, Miscoe spoke with Claude McCormick ("McCormick") of Armedica Manufacturing Corporation ("Armedica") about the possible creation of a new traction table. ECF Nos. 95 & 98 at ¶ 117. Dr. Kennedy and Miscoe traveled to Armedica's facility in Arkansas in order to discuss chiropractic products. Id. at ¶ 118. During the visit, Dr. Kennedy lay on a table and made some suggestions as to how it could be improved. Id. at ¶¶ 119-121. In February 2009, Dr. Kennedy and Miscoe returned to Armedica's facility and looked at a table that had been designed in accordance with Dr. Kennedy's suggestions. Id. at ¶ 122. Mir-Com became the exclusive distributor of the tables manufactured by Armedica and "traction blocks" associated with those tables. Id. at ¶ 124 (capitalization omitted). Dr. Kennedy was ultimately retained by Mir-Com to work as an online course instructor. Id. at ¶ 126. Mir-Com started to pay Dr. Kennedy a royalty in the amount of $11.00 for every unit of "traction blocks" sold. Id. at ¶¶ 127, 129. Dr. Kennedy receives approximately $1,800.00 in royalty payments from Mir-Com in a given year. Id. at ¶ 128. At some point, Bryanne began to distribute belts owned by MRP and the tables manufactured by Armedica. Id. at ¶¶ 130-131.
Encore commenced this action against Dr. Kennedy in the Circuit Court for Hamilton County, Tennessee, on April 1, 2009, alleging various breaches of the written contract executed on June 25, 2002. ECF No. 97-26 at 2-24. A hearing was held before the Circuit Court on April27, 2009. ECF No. 24-1 at 2. Testimony given by Dr. Kennedy suggested that he had an ownership interest in Mir-Com. ECF No. 97-12 at 3, 9-10, ¶ 8. On May 8, 2009, Mir-Com commenced an action against Dr. Kennedy in the Court of Common Pleas of Somerset County, Pennsylvania, seeking a declaration that Miscoe was its sole owner. Id. at 2-5. Dr. Kennedy did not dispute any of Mir-Com's averments. Id. at 9-10, ¶¶ 1-10. Mir-Com responded to Dr. Kennedy's admissions by moving for a judgment on the pleadings. Id. at 12-13. In an order dated June 24, 2009, the Court of Common Pleas declared Miscoe to be the sole owner of Mir-Com, "to the exclusion of all others." Id. at 14.
On June 3, 2009, the Circuit Court temporarily enjoined Dr. Kennedy from designing, developing, advertising, marketing, or selling products that were competitive with those designed, developed, advertised, marketed, or sold by Encore. ECF No. 24-1 at 2-7. Dr. Kennedy filed a motion to dissolve the injunction on June 4, 2010, seeking a declaration that he had never breached his contract with Encore. Id. at 9. Although the motion was denied on March 3, 2011, the injunction was modified to correspond with "the prohibitions agreed to by the parties in...
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