McNamee v. Minxray, Inc.
| Decision Date | 06 December 2017 |
| Docket Number | No. 17 C 02057,17 C 02057 |
| Parties | G. MICHAEL MCNAMEE, Plaintiff, v. MINXRAY, INC., Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
ORDER
Plaintiff G. Michael McNamee filed this suit against Defendant MinXray, Inc., alleging two breach of contract claims centered around agreements for the licensing and manufacture of various portable x-ray technologies.1 R.1, Compl. ¶¶ 17-23.2 MinXray now brings a motion to dismiss Count One of McNamee's complaint for failure to state a claim. R. 7, Mot. to Dismiss. For the reasons that follow, MinXray's motion to dismiss is denied.
When evaluating a motion to dismiss, courts must "accept all well-pleaded facts as true and draw reasonable inferences in the plaintiffs' favor." Roberts v. City of Chi., 817 F.3d 561, 564 (7th Cir. 2016). McNamee is an inventor of portable x-ray and imaging equipment. Compl. ¶ 8. MinXray makes, sells, and distributes portablex-ray and imaging products. Id. In 2006, McNamee and MinXray entered into an agreement, Compl. Exh. 1, 2006 Agreement, to keep certain proprietary information confidential while they explored a possible business relationship. Id. ¶¶ 5-6. That agreement defined "proprietary" information as information given by McNamee to MinXray about McNamee's suppliers, his trade secrets, formulas, product plans, specifications, trademarks, copyrights, and other intellectual property information. Id. ¶ 6. The Agreement also specifically defined proprietary information to include information related to "a Mobile Digital X-ray Unit," known by the acronym "MDX." Id. The definition explained that MDX is "a portable stand designed to mount to a portable x-ray generator with any digital radiology detector plate and any laptop computer." Id.
The 2006 Agreement further stated that McNamee would own outright any products developed from the proprietary information given to MinXray, and that MinXray would not be entitled to any royalty, commission, or payment for sale of those products without McNamee's consent. Compl. ¶ 6. According to the complaint, over the next two years, McNamee gave MinXray a few different types of proprietary information, specifically information about: (i) MDX; (ii) "portable housings for digital imaging equipment," called a "Digital Imaging Housing Package" (DIHP); (iii) the design, making, and selling of direct radiography (DR) portable and mobile equipment; and (iv) the design, making, and selling of "portable and mobile medical equipment in general." Id. ¶ 7.
On May 15, 2008, McNamee and MinXray formed the business relationship contemplated by the 2006 Agreement, signing a new contract called "License and Consulting Service Agreement." Compl. ¶ 8; R. 1, Compl., Exh. 2, 2008 Agreement. The new agreement granted MinXray a license to make and sell McNamee's "DIHP" (Digital Imaging Housing Package) invention and gave McNamee royalties for each sale. 2008 Agreement. McNamee alleges that starting from the date of the 2008 Agreement through May 15, 2015, MinXray designed, made, or sold five products that incorporated his DIHP technology: CMDR-1S, CMDR-2S, MDRK-2, CMDR-2SLW, and Integris. Compl. ¶ 9. MinXray paid McNamee royalties for three of these products, but did not pay McNamee royalties for CMDR-2SLW or Integris because it disputed that those products were covered by the 2008 Agreement. Id. ¶¶ 10, 12-13.
In July 2015, McNamee wrote to MinXray, asserting a right to receive royalties for CMDR-2SLW and Integris, and requesting MinXray's sales records for both of those products. Compl. ¶ 11. Believing that CMDR-2SLW and Integris used his DIHP technology, McNamee repeatedly wrote to MinXray asking for royalties. Id. ¶ 14. MinXray refused to turn over the sales records, maintaining that it had paid royalties on all products covered by the 2008 Agreement, and arguing that CMDR-2SLW and Integris models "do not incorporate the technology developed by [McNamee] under our agreement." Id. ¶¶ 12, 15-16.
In bringing this suit, McNamee alleges two breach of contract claims. Compl. ¶¶ 17-23. Count One arises out of the 2006 Agreement. Id. ¶¶ 17-20. Assuming forthe purpose of this count that the CMDR-2SLW and Integris models do not use McNamee's DIHP technology, McNamee alleges that these two products are based on other proprietary information (such as information relating to the Mobile Digital X-Ray Unit and "mobile medical equipment utilizing [direct radiography]") that McNamee provided to MinXray under the 2006 Agreement. Id. ¶ 18. In "designing, manufacturing, and/or selling" CMDR-2SLW and Integris based on McNamee's proprietary information, MinXray allegedly breached the 2006 Agreement. Id. ¶¶ 19-20.
In the alternative, McNamee alleges that CMDR-2SLW and Integris do incorporate the DIHP technology and are thus covered by the 2008 Agreement. Compl. ¶¶ 21-23. Because MinXray has not paid royalties on these two products, McNamee contends that MinXray has breached the 2008 Agreement and owes him a $2,500 royalty payment for each sale of the relevant products between May 2008 and May 2015, and for any sale thereafter (because a royalty-free license to sell that was to be granted to MinXray by McNamee in 2015 is now allegedly null and void). Id. ¶ 23.
MinXray initially brought a motion to dismiss both claims under Federal Rule of Civil Procedure 12(b)(6), Mot. to Dismiss, arguing that neither count adequately stated a claim, but later withdrew its motion as against the second count (breach of 2008 Agreement). MinXray also withdrew one aspect of its argument against the first count (breach of 2006 Agreement). See R. 18, 5/17/17Letter by MinXray, Inc.; see also R. 20, 5/18/17 Letter by McNamee.3 This Opinion addresses the remaining argument in the dismissal motion.
A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This statement must "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). The Seventh Circuit has explained that this rule "reflects a liberal notice pleading regime, which is intended to 'focus litigation on the merits of a claim' rather than on technicalities that might keep plaintiffs out of court." Brooks v. Ross, 578 F.3d 574, 580 (7th Cir. 2009) (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002)).
"A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the viability of a complaint by arguing that it fails to state a claim upon which relief may be granted." Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014). "[A] complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). Factual allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555; see also E.E.O.C v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007). Factual allegations—as opposed to mere legal conclusions—areentitled to the assumption of truth. Iqbal, 556 U.S. at 678-79. "A pleading that offers 'labels and conclusions' or a 'formulaic recitation of the elements of a cause of action will not do.'" Id. at 678 (2009) (quoting Twombly, 550 U.S. at 555).
To state a breach of contract claim under Minnesota law,4 McNamee needs to allege: (1) formation of a contract; (2) performance by himself of any conditions precedent to his right to performance by MinXray; and (3) breach of the contract by MinXray. Park Nicollet Clinic v. Hamann, 808 N.W.2d 828, 833 (Minn. 2011). Here, in Count One, McNamee sufficiently alleges the formation of the 2006 Agreement and has included sections of the agreement in the complaint and as an attached exhibit. Compl. at 2-4; 2006 Agreement. Taking McNamee's allegations as true at this stage, it appears that McNamee performed his conditions by giving proprietary information (unrelated to Digital Imaging Housing Package technology) to MinXray. Compl. at 4-5. As to the last requirement, McNamee also adequately alleges a breach by MinXray—specifically, that it used some of the proprietary information that McNamee gave it to "design[ ], manufactur[e], and/or sell[ ]" two product models (CMDR-2SLW and Integris) based on the information without getting McNamee's permission or compensating him for it. Id. at 9-10.
MinXray's motion to dismiss argues, first, that McNamee fails to state a claim because his complaint effectively states only that MinXray might havebreached the 2006 Agreement, not that it did breach that agreement. R. 8, Mot. to Dismiss Br. at 6-7; R. 25, Def's. Rep. Br. at 1-3. This argument hinges on McNamee's use of the phrase "and/or" when describing how MinXray used his proprietary information. MinXray contends that in using the word "or" in the phrase "designed, manufactured and/or sold," the complaint alleges at least one scenario which does not state a valid claim: that MinXray merely sold a product that it did not develop or manufacture, and thus did not make any use of McNamee's proprietary information. Following that thinking, MinXray could not be liable for breach of contract to McNamee if it were merely selling something designed and manufactured "by someone else (who presumably had invented the same thing that the plaintiff had invented)." Def's. Rep. Br. at 2.
This is a hyper-technical argument that overlooks the fact that McNamee did state a valid claim when he used the word "and" in the phrase "and/or." In using the word "and," the complaint alleges that MinXray developed, manufactured, and sold a product based on the McNamee's proprietary information. Although it might have been better for McNamee to only...
To continue reading
Request your trial