Medpace, Inc. v. Inspiremd, Inc.
| Decision Date | 08 March 2019 |
| Docket Number | CIVIL ACTION NO. 1:16-cv-830 (WOB-SKB) |
| Parties | MEDPACE, INC. PLAINTIFF v. INSPIREMD, INC. DEFENDANT |
| Court | U.S. District Court — Southern District of Ohio |
This case arises from allegations that Defendant InspireMD breached its contract with Medpace to pay for the clinical trial services that Medpace provided pursuant to a Master Services Agreement and Task Order. The Complaint sets forth the following three counts:
Plaintiff seeks total damages in excess of $1,964,922, plus interest, costs, attorneys' fees, and expenses. (Doc. 20, at 8).
This matter is now before the Court on (1) Defendant InspireMD's motion for summary judgment (Doc. 35); (2) Plaintiff Medpace's motion to "deny Defendant InspireMD, Ltd's motion for summary judgment . . . , or in the alternative, to defer considering defendant's motion" until further discovery is complete (Doc. 44); and (3) Medpace's motion to strike the declaration of InspireMD's counsel, Jonathan Pressment (Doc. 45).
The Court previously heard oral argument on these motions and took the matter under submission. (Doc. 61). At that hearing, the parties' requested that the Court state its view of the legal issues herein, prior to ruling on the pending motions, so that the parties could participate in mediation with the benefit of the Court's opinion. After further study, the Court now issues the requested opinion.
On May 21, 2013, Plaintiff Medpace, Inc. and Defendant InspireMD, Ltd. entered into a contract, the Master Services Agreement ("MSA"). (Doc. 20-1 at 1). Under the MSA, Medpace agreed to conduct clinical trials for InspireMD's new MGaurd Prime Stent System (the "Stent"), and InspireMD agreed to pay for the services. (Doc. 20, ¶ 11-12); (Doc. 20-1 at 1, 3). In addition, the MSA provided that a Task Order would establish the precise services to be performed and payments to be made. (Doc. 20-1 at 1). In the event of a conflict between the terms of the MSA and the Task Order, the MSA would control unless the Task Order statedotherwise. Id. at 15. The Task Order was eventually executed on June 12, 2013, and set forth the: (1) "Scope of Work," (2) "Project Schedule," (3) "Project Budget," and (4) "Payment Schedule." Id. at 16. The material terms of the MSA and the Task Order are as follows.
Pursuant to the MSA, InspireMD agreed to: (i) pay Medpace "fixed" Service Fees (or Direct Fees); (ii) "reimburse" Medpace for "reasonable pass-through costs identified in the Task Order"; and (iii) pay for "Pre-funded Expenses" in the "Task Order's project budget" in order to facilitate "timely payment of such funds to Pre-funded Vendors." (Doc. 20-1 at 3-4, 16, 26-27). As to the payment amount, InspireMD agreed to pay Medpace "an amount equal to the Project Budget . . ., which amount shall be payable pursuant to the Payment Schedule." Id. at 16; see also id. at 3. The Project Budget specifically establishes:
Total Service Fees (Direct Fees) of $3,347,035; and
Total Pass-Through Costs of $292,941.
Id. at 16, 27-28. The total amount of Service Fees is divided in the Payment Schedule into twenty-one (21) payments that correspond to individual milestones. Id. at 28. In relevant part, the Payment Schedule sets forth a series of ten quarterly payments. Id. There are an additional eight payments that are connected to individual milestones for the number of patients Medpace enrolls or completes, with a total of 445 clinical trials to be completed. Id. at 28. In other words, these eight additional payments are contingent upon patient enrollment and completion, similar to a "bonus" for exceptional progress with the clinical trials.
Both the MSA and the Task Order prescribe that the "Service Fees" or "Direct Fees"are "fixed costs unless the underlying assumptions change, including but not limited to, trial duration, number of investigative sites, number of patients, and services provided by Medpace." Id. at 3, 16, 30 (emphasis added).
Any changes to the Task Order, the Project Budge, Payment Schedule, Project Schedule or the underlying assumptions required a written contract amendment—signed by both parties—"detail[ing] the requested changes to the applicable task, responsibility, duty, budget, timeline or other matter." Id. at 3.
In terms of terminating the MSA, either party could do so "without cause" by providing the other party sixty days' written notice. Id. at 7.
InspireMD could terminate the Task Order "without cause" by providing sixty (60) days' written notice. Id. at 7, 8. Medpace, on the other hand, could terminate the Task Order "only if" InspireMD "defaulted on its obligations." Id. In that case, the MSA requires Medpace to give InspireMD written notice of default and an opportunity to cure the breach before terminating the Task Order. Id. The MSA provides that any notice (e.g., termination) is required to be in writing and is "effective upon receipt" by August J. Troendle, Medpace's President and CEO in Cincinnati, Ohio (if to Medpace) and "effective upon receipt" by Craig Shore in Tel Aviv, Israel (if to InspireMD). Id. at 8.
In the event that the Task Order is terminated before completion, Medpace is obligated to submit an itemized accounting of the services performed, expenses incurred, and payments received to determine the balance due. Id. InspireMD, in turn, must "pay [Medpace] for all Services rendered pursuant to the unfinished Task Order prior to suchtermination and any non-cancelable expenses incurred in connection with [Medpace]'s performance of Services thereunder." Id. at 7.
On September 23, 2014, Jen Folley, InspireMD's outside consultant and project manager, sent a letter to Deborah Schmalz, Medpace's Senior Director of Regulatory Affairs. (Doc. 26-4 at 2). The letter was a "follow-up" to a prior conversation. Id. In the letter, Folley asked that certain activities related to the clinical trials be kept "to a minimum" and other tasks "should be ceased or halted." Id. The letter also included a table listing those tasks InspireMD wished to "freeze" and those tasks that should be performed on an "[a]s needed" basis. Id. Nowhere in this letter does it mention that InspireMD intended to terminate the Task Order or the MSA. Approximately two months later, InspireMD then made its sixth quarterly payment to Medpace, which was not due until November 30, 2014. (Doc. 35-1 at 7; Doc. 26, ¶ 71; Doc. 20, ¶ 25).
Nearly a year later, on November 24, 2015, (roughly six days before the tenth and final quarterly payment was due) Medpace sent a Notice of Termination of the Task Order and the MSA ("Notice of Termination") to InspireMD's Craig Shore. (Doc. 20-2 at 1). In the Notice of Termination, Medpace stated that InspireMD had failed to make four previous quarterly payments (quarterly payments 7-10) or cure these breaches. (Doc. 20, ¶¶ 24-25, 29). Medpace included with its Notice of Termination an itemized accounting of the services performed, expenses incurred, and outstanding invoices up to that point, (Doc. 20-2 at 1), and requested that InspireMD remit payment for the total itemized amount of $1,964,922.Id. This suit followed when InspireMD refused to pay.
Since this lawsuit was removed from state court on August 10, 2016, Medpace has twice amended its complaint. (Docs. 7, 20).1 Roughly two months into discovery, InspireMD moved for summary judgment. (Doc. 35). A week later, InspireMD sought an order staying all discovery pending the resolution of its motion for summary judgment. (Doc. 37). In granting the stay on discovery on March 9, 2018, the magistrate judge viewed Medpace's argument that it needed discovery as "cursory and unpersuasive" because the "motion seeks to resolve, as a matter of law, the two parties' differing constructions or interpretations of the same contractual language." (Doc. 41 at 3).
"When interpreting contracts in a diversity action," courts should "generally enforce the parties' contractual choice of governing law." See, e.g., Savedoff v. Access Group, Inc., 524 F.3d 754, 762 (6th Cir. 2008) (citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 596 (1991); see also Tele-Save Merchandising Co. v. Consumers Distrib. Co., Ltd., 814 F.2d 1120,1122 (6th Cir. 1987) (). The MSA's choice-of-law clause explicitly provides that the performance, interpretation, and construction of the MSA is controlled by Ohio law. (Doc. 20-1 at 14). As the parties do not dispute that the MSA and Task Order at issue are governed by Ohio law, the Court will apply Ohio law to the parties' contractual dispute.
Under Ohio law, the essential elements of an enforceable contract include "an offer, acceptance, contractual capacity, consideration (the bargained for legal benefit and/or detriment), a manifestation of mutual assent and legality of object and of consideration." Williams v. Ormsby, 966 N.E.2d 255 at 258 (Ohio 2012) (quoting Kostelnik v. Helper, 770 N.E.2d 58, 61 (Ohio 2002)). The Court agrees with the parties that the MSA...
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