Hess v. Biomet, Inc.

Decision Date28 June 2022
Docket Number3:16-CV-208 JD
PartiesCHARLES HESS, et al., Plaintiffs, v. BIOMET, INC., et al., Defendants.
CourtU.S. District Court — Northern District of Indiana

On August 9, 2021, after a six-day jury trial, a verdict was entered in favor of Plaintiffs Charles Hess, Marty Higgins Robert “Glen” McCormick, Ronald Papa, Al Tornquist, and Frank Shera (collectively, the Plaintiffs). (DE 379.) On November 23, 2021 the Court denied the motion for judgment as a matter of law brought by Defendants Biomet, Inc., and Zimmer Biomet Holdings, Inc (collectively, the Defendants). (DE 389.) The Court now considers Plaintiffs' motion for an award of prejudgment interest (DE 384) and Defendants' motion to grant judgment in its favor on the basis of several affirmative defenses (DE 391).

A. Factual Background

In the early 1980s, Plaintiffs were distributors of medical devices for Zimmer, Inc. Biomet was attempting to enter the medical device field and approached each of the six plaintiffs about joining Biomet as independent distributors. At the time, though, Biomet's sales were smaller than Zimmer's, which meant that moving to Biomet would result in the Plaintiffs losing compensation in the short term, since distributors were paid on commission and Biomet could not offer large up-front compensation. In order to entice them, Biomet offered each plaintiff lifetime commissions on sales made after their retirement, in addition to the sales they made as distributors. Between 1980 and 1983, each of the six plaintiffs accepted these offers and signed distributorship agreements.

Section 9 of the distributorship agreements established a long-term commission program for each of the Plaintiffs. (DE 158-2 § 9.) After the long-term program vested, upon retirement, the Plaintiffs would be entitled to payments which were percentages of the total “net sales:” one and one-quarters percent of the first $4 million in net sales per year, and one-half of one percent of all further net sales, with no maximum. These payments would continue for the Plaintiffs' lifetimes (or for a minimum of ten years). (Id.) The contracts proceeded to define the term net sales:

The term “net sales” shall be defined as gross sales made within the subject distributorship at the time this program is initiated and actually collected by Biomet less returns and allowances and less adjustments for nonpayment of invoices as provided herein.

(Id.) Each of the Plaintiffs retired between 1995 and 1999. Biomet then began paying long-term commissions to the Plaintiffs on a bi-monthly basis. These commissions were based on the sales of orthopedic products, but not other business units Biomet had acquired. The commission statements contained sparse information beyond the amount being paid until 2007, when the commission statements began listing each item sold upon which the Plaintiffs were receiving commissions. However, these statements did not list the items sold upon which the Plaintiffs were not receiving commissions.

Around 2015, Biomet began undergoing a merger with Zimmer. The Plaintiffs asserted that they should be entitled to commissions not only on Biomet products, but also on any Zimmer products once the merger went through. The Plaintiffs claimed that it was around then that they also discovered that Biomet had been paying them long-term commissions only on Biomet Orthopedic products, not from the sales of other products by companies under the Biomet umbrella.

On April 4, 2016, Plaintiffs filed a complaint. (DE 1.) As relevant here, Plaintiffs brought a claim for breach of contract alleging that Biomet “failed to pay [Plaintiffs] a commission on all Biomet products sold in their respective territories as required by the terms of the retirementincome program.” (DE 1 ¶ 96.) In their answer, Defendants asserted seventeen affirmative defense. (DE 50.)

At the summary judgment stage, parties disputed whether “subject distributorship” within the aforementioned distributorship agreement included all Biomet products sold in their respective territories, even those that the Plaintiffs did not and were not authorized to sell - as interpreted by Plaintiffs - or only on the products sold by the Plaintiffs at the time they retired. (DE 210 at 1.) The Court denied summary judgment on the breach of contract claim, concluding that the agreement was ambiguous and that none of the extrinsic evidence submitted resolved the ambiguity. (Id. at 30.) The Court also determined that a number of Defendants' affirmative defenses were either resolved by concession or as a matter of law. Following summary judgment, only eight of the seventeen affirmative defenses remained. (Id. at 39.) The parties later agreed that the affirmative defenses of waiver, estoppel, unjust enrichment, acquiescence, and laches were to be tried by the Court, not the jury. (DE 301 at 14; DE 267 at 3 n.3.) The other remaining affirmative defenses were either excluded by the Court in an order addressing the parties' motions in limine, (DE 301 at 7, 12-14), or allowed to be presented at trial. (Id. at 14-16.)

A six-day jury trial commenced. At the end of Plaintiffs' case-in-chief, Defendants moved for a motion for judgment of matter of law under Federal Rule of Civil Procedure 50, which the Court took under advisement. Ultimately, the jury returned a verdict in favor of a finding that Defendants breached the Distributorship Agreements, in part, by failing to pay commissions owed for the net sales of sports medicine and trauma products. (DE 379.) Plaintiff Shera was only awarded damages on trauma products. This verdict was in line with the Defendants' predominate interpretation of the contracts - that Plaintiffs were only entitled to retirement commissions on the products sold in their territories at the time they retired.

After the verdict was returned, the Defendants renewed their motion for judgment as a matter of law. (DE 381.) On November 23, 2021, the Court denied this motion and advised the Defendants that if they intended “to move on their remaining equitable affirmative defenses,” they had 14 days to do so. (DE 389 at 18.) In line with this order, the Defendants then filed a motion seeking judgment in their favor on the remaining affirmative defenses, which include waiver, estoppel, laches, unjust enrichment, and acquiescence.[1] (DE 391.) Plaintiffs filed a response (DE 393) and Defendants filed a reply (DE 397). Plaintiffs then filed a motion seeking leave to file a surreply, along with the surreply, arguing that Defendants raised new, previously unaddressed arguments in their reply. (DE 399.)

Plaintiffs have also filed a motion for an award of prejudgment interest. (DE 384.) In their response, Defendants argue that this motion is premature given the pending affirmative defenses. (DE 388.) The Court agrees. Therefore, the Court will first consider Defendants' affirmative defenses prior to considering Plaintiffs' motion for an award of prejudgment interest.

B. Discussion

(1) Affirmative Defenses

The Defendants argue that five affirmative defenses justify entering judgment in their favor: (1) Plaintiffs' claims have been waived; (2) Plaintiffs are estopped from asserting the claims; (3) Plaintiffs' claims are untimely and wholly or partially limited due to laches and other equitable doctrines limiting the allegations of stale claims; (4) Plaintiffs' claims are barred because they have been unjustly enriched; and (5) Plaintiffs' claims are barred by the doctrine of acquiescence. (DE 392 at 3.)

As an initial matter, the Court notes that neither acquiescence nor unjust enrichment are separate affirmative defenses. [A]cquiescence . . . is [not] an independent equitable remedy, [but rather] is an alternate first element of equitable estoppel.” O.K. Sand & Gravel, Inc. v. Martin Marietta Corp., 786 F.Supp. 1442, 1447 n.4 (S.D. Ind. 1992). Acquiescence is also considered as an element in the laches affirmative defense. SMDfund, Inc. v. Fort Wayne-Allen Cnty. Airport Auth., 831 N.E.2d 725, 729 (Ind. 2005).[2] Accordingly, the Court will consider acquiescence when it considers estoppel and laches. See also Ind. R. Trial P. 8(C) (listing out various affirmative defenses, including estoppel, laches, and waiver, but not acquiescence).

Unjust enrichment is also not an independent affirmative defense, but rather is “more appropriately asserted as a claim, as opposed to a defense[.] City of Mishawaka v. Kvale, 810 N.E.2d 1129, 1135 n.5 (Ind.Ct.App. 2004); see Warrior Ins. Grp., Inc. v. Insureon.com, Inc., No. 00 C 3619, 2000 WL 1898867, at *1 (N.D. Ill.Dec. 29, 2000) ([U]njust enrichment is not an affirmative defense.”). The Defendants fail to cite a single case which supports that unjust enrichment can be used as an affirmative defense. In fact, in their opening brief, Defendants fail to include any discussion of case law to support their unjust enrichment argument. (DE 392 at 20-21.)

In their reply brief, the Defendants do cite to two cases which they claim support their argument: New Welton Homes v. Eckman, 830 N.E.2d 32 (Ind. 2005) and Belle City Amusements, Inc. v. Doorway Promotions, Inc., 936 N.E.2d 243 (Ind.Ct.App. 2010).[3] (DE 397 at 12.) However, these cases are inapplicable and appear to be unrelated to unjust enrichment. New Welton Homes held that a discovery rule typically applied in tort law for statute of limitations purposes could not be applied in contract law because allowing such a rule to [supersede] the contractual limitations” would burden the parties with unbargained-for obligations. 830 N.E.2d 32. Belle City Amusements held that damages awarded in a breach of contract case by the trial judgment were not...

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