Geomc Co. v. Calmare Therapeutics, Inc.
| Decision Date | 18 August 2017 |
| Docket Number | CIVIL ACTION NO. 3:14-cv-01222 (VAB) |
| Parties | GEOMC CO., LTD., Plaintiff, v. CALMARE THERAPEUTICS, INCORPORATED, Defendant. |
| Court | U.S. District Court — District of Connecticut |
GEOMC Co., Ltd. ("Plaintiff," or "GEOMC") filed this lawsuit on August 22, 2014 and claims that Calmare Therapeutics, Incorporated ("Defendant," or "CTI") failed to pay for or return certain medical devices that GEOMC manufactured and supplied to CTI. Complaint, ECF No. 1; Sec. Am. Compl., ECF No. 137. CTI raises several affirmative defenses and counterclaims, including claims that GEOMC has already been paid all amounts owed and that the contractual agreement for repossession of the devices is invalid.
GEOMC now moves for summary judgment on all claims. As explained in further detail below, GEOMC's motion is GRANTED IN PART AND DENIED IN PART.
As to GEOMC's breach of contract claim, the motion is GRANTED with respect to CTI's liability for failing to pay GEOMC for the medical devices sold after 2011, and the motion is DENIED with respect to CTI's liability for any medical devices that have not been sold. The motion is GRANTED as to GEOMC's claims of replevin, wrongful detention, conversion, and unjust enrichment, and the motion is DENIED as to GEOMC's claim under the Connecticut Unfair Trade Practices Act ("CUTPA"). Disputes related to the amount of damages owed under the applicable contracts will be determined at trial.
GEOMC Co., Ltd. ("GEOMC"), formerly known as Daeyang E&C Co., Ltd., is a South Korean corporation with its principal place of business in South Korea. L.R. 56(a)(1) ¶¶ 1-2. GEOMC manufactures, distributes and sells medical devices. Id. Calmare Therapeutics Incorporated ("CTI"), formerly known as Competitive Technologies, Inc., is a Delaware corporation with its principal place of business in Connecticut. Id. at ¶¶ 3-4.
In October 2007, GEOMC and CTI entered into a "Territory Exclusive License Agreement for Intellectual Property" ("2007 Agreement"). Id. at ¶¶ 5-7. The 2007 Agreement granted GEOMC an exclusive, worldwide license to manufacture and supply certain medical devices ("the Devices") that incorporated a patented pain management technology. Id.; 2007 Agreement, Oh Dec. Ex. A, ECF No. 171-1.
The language of the 2007 Agreement provides for profit-sharing between GEOMC and CTI in connection with the sales of the Devices: "DAEYANG [(GEOMC)] and CTT [(CTI)] will share profits of 50% each from sales of Licensed Products produced by DAEYANG." Id. at ¶ 3.2. The agreement also provides that "[p]ayments of royalties shall be made in United States Dollars within thirty (30) days following the end of each monthly royalty period, and such payments shall include all royalties that have accrued during said monthly period." Id. at ¶ 4.2. Therefore, under the 2007 Agreement, if CTI sold a number of Devices in a given month, CTI would owe GEOMC fifty per cent (50%) of the sale price for those Devices at the end of the month.
The 2007 Agreement also required GEOMC to perform a regular accounting detailing the quantity and prices of all Devices sold: Id. at ¶ 4.3. The agreement does not specify any corresponding requirement for CTI to provide GEOMC with any such reports regarding Devices sold by CTI. CTI alleges that GEOMC never provided CTI with any of the reports required under this agreement. L.R. 56(a)(2) at p. 20.
The following year, in August 2008, GEOMC and CTI entered into another agreement entitled "Distributor Appointment in Korea" ("2008 Distributor Appointment"). L.R. 56(a)(1) ¶ 8; 2008 Distributor Appointment, Oh Dec. Ex. B, ECF No. 171-2. Relying on the language of the more detailed 2007 Agreement, the 2008 Distributor Appointment succinctly provides as follows: "Pursuant to the Territory Exclusive License Agreement of the Pain Management Device made October 17, 2007 between Competitive Technologies, Inc. (CTT) and GEOMC, both parties agree that CTT delegates GEOMC to designate the exclusive distributor for the Korea under the same conditions set forth in the Agreement." Id.
The 2008 Distributor Appointment does not specify any particular entity or entities that GEOMC must appoint as the "exclusive distributor" in Korea, nor does it separately address the division of royalty payments or reports. Id. Following this agreement, GEOMC appointed itself as the exclusive distributor for the devices in Korea. L.R. 56(a)(1) ¶ 8. Since that time, CTI claims that GEOMC has not specified the exact number of devices sold in Korea, nor has GEOMC made any payments to CTI in connection with sales of devices in Korea. L.R. 56(a)(2) p. 19.
In January 2010, the parties agreed to amend the payment mechanism that was outlined in the 2007 Agreement. L.R. 56(a)(1) ¶¶ 9-10. GEOMC and CTI executed a Memorandum of Understanding ("2010 MOU") providing that "GEOMC will receive $9,000 for the sale of each unit" instead of dividing the proceeds by fifty per cent.2 2010 MOU, Oh Dec. Ex. C, ECF No. 171-3. The 2010 MOU was signed by John B. Nano, CTI's President and Chief Executive Officer ("CEO") at the time, and Young H. Lim, GEOMC's President and CEO at the time. Id.
In April 2011, the parties again adjusted the agreed-upon price that CTI would pay GEOMC for each device sold, increasing the per-unit payment amount from $9,000 to $10,000. L.R. 56(a)(1) ¶ 11. This increase was not memorialized in a written agreement, but both parties acknowledge that GEOMC and CTI agreed to increase the payment price to $10,000 per unit in April 2011.3 L.R. 56(a)(2) ¶ 11.
Under the 2007 Agreement and subsequent amendments, GEOMC shipped a total of 691 Devices to CTI between 2008 and 2013.4 L.R. 56(a)(1) ¶ 13. The parties agree as to the number of units shipped during this period; however, they disagree as to how much money has been paid between the parties for these devices, and whether the amount paid satisfies the parties' obligations under the governing agreements.
According to GEOMC, CTI began experiencing "cash flow" problems at some point during the course of the parties' relationship. Id. at ¶¶ 19-20; Oh Dec. ¶ 12, ECF No. 171. Inorder to help accommodate CTI's situation, GEOMC claims that it allowed CTI to make certain block payments. Id. GEOMC does not specify the timing or amount of such payments.
CTI, on the other hand, disputes GEOMC's characterization of CTI's financial trouble. L.R. 56(a)(2) ¶¶ 19-20. According to CTI, GEOMC was experiencing financial trouble, not CTI, and in order to accommodate GEOMC's needs, CTI made block payments to GEOMC between 2008 and 2012 that overrepresented the amounts owed under the contract. Id. at p. 20. According to a document sent from Mr. Johnson to Mr. O'Connell in 2013 regarding the status of the accounting for GEOMC devices, CTI paid GEOMC an advance of $147,000 for design work in August 2008, $100,000 in September 2009, and another $100,000 in 2010. Id.; Johnson E-mail, Weil Dec. Ex. W, ECF No. 172-13.5 GEOMC disputes the specific amounts alleged by CTI in connection with those block payments, and GEOMC also disputes their characterization as "overpayments." Pl. Repl. Br. at 4-6, ECF No. 178.
The parties do not dispute that, since January 1, 2012, CTI has sold 61 devices under the 2007 Agreement as amended.6 L.R. 56(a)(1) ¶ 55. The parties also do not dispute that CTI has not made any payments to GEOMC in connection with any sales of devices since December 31, 2011. Id. at ¶ 56.
In May 2012, approximately five months after CTI ceased making payments under the 2007 Agreement, the parties entered into a "Security Agreement" agreement regarding the devices ("2012 Security Agreement"). 2012 Sec. Agreement, Oh Dec. Ex. E, ECF No. 171-5. The terms of this agreement granted GEOMC a security interest in the following identified"collateral": as well as Id. at ¶ 2.
The agreement specifies several "events of default" that would trigger this security interest, including the "failure of the Company to pay any of the amounts due under the Obligations as and when due and payable." Id. at ¶ 8(a). If an event of default occurs under the agreement, GEOMC may "declare the unpaid balance of any Obligations to be immediately due and payable" or it may require CTI to "assemble the Collateral and make it available to Supplier[.]" Id. at ¶ 9.
The 2012 Security Agreement also specifies that CTI is required to maintain insurance on the specified collateral. Id. at ¶ 6 ( ). GEOMC insists that CTI never maintained such insurance, see L.R. 56(a)(1) ¶ 32, while CTI contests that it did provide the requisite insurance. See L.R. 56(a)(2) at p. 22; Insurance Policy Renewal and Invoice, Mir Dec. Exs. A-B, ECF Nos. 176-1, 176-2.
Johnie D. Johnson, CTI's acting CEO at the time, signed the 2012 Security Agreement and Ms. Lim, who was still serving as GEOMC's President and CEO, signed on behalf of GEOMC. 2012 Sec. Agreement, Oh Dec. Ex. E, ECF No. 171-5. The text of the agreement includes explicit assurances that the agreement is binding on both corporate entities and that the signatories have the requisite authority to sign on behalf of each company: "This Agreement... ha[s] been properly executed on behalf of the Company and, upon execution by the Supplier, this Agreement and the related...
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