St. Jude Med., S.C., Inc. v. Biosense Webster, Inc.

• Decision Date: 03 February 2014
• Docket Number: Civil No. 12–621 ADM/TNL.
• Citation: 994 F.Supp.2d 1033
• Court: U.S. District Court — District of Minnesota
• Parties: ST. JUDE MEDICAL, S.C., Inc., Plaintiff, v. BIOSENSE WEBSTER, INC., Johnson & Johnson, and Jose B. de Castro, Defendants.

994 F.Supp.2d 1033

ST. JUDE MEDICAL, S.C., Inc., Plaintiff,

v.BIOSENSE WEBSTER, INC., Johnson & Johnson, and Jose B. de Castro, Defendants.

Civil No. 12–621 ADM/TNL.

United States District Court,

D. Minnesota.

Feb. 3, 2014.

Edward F. Fox, Esq., Carrie L. Hund, Esq., Mark R. Bradford, Esq., Jeffrey R. Mulder, Esq., and Nicole A. Delaney, Esq., Bassford Remele, PA, Minneapolis, MN, on behalf of Plaintiff.

Joseph W. Anthony, Esq., Mary L. Knoblauch, Esq., Courtland C. Merrill, Esq., and Steven C. Kerbaugh, Esq., Anthony Ostlund Baer & Louwagie, PA, Minneapolis, MN, on behalf of Defendants.

MEMORANDUM OPINION AND ORDER

ANN D. MONTGOMERY, District Judge.

I. INTRODUCTION

On October 24, 2014, the undersigned United States District Judge heard oral argument on Plaintiff St. Jude Medical, S.C., Inc.'s (“St. Jude”) Motion for Summary Judgment on Liability [Docket No. 171], Motion to Exclude Expert Testimony by Gorowsky [Docket No. 182], and Motion to Exclude Expert Testimony by Aguilar and O'Neill [Docket No. 188].¹ The Court also heard argument on Defendants Biosense Webster, Inc., Johnson & Johnson, ² and Jose B. de Castro's (“de Castro”) Motion for Partial Summary Judgment [Docket No. 176]. For the reasons stated herein, St. Jude's Motion for Partial Summary Judgment is granted in part and denied in part, its Motion to Exclude Testimony by Gorowsky is denied, and its Motion to Exclude Expert Testimony by Aguilar and O'Neill is granted in part and denied in part. Defendants' Motion for Partial Summary Judgment is granted in part and denied in part.

II. BACKGROUND

St. Jude and Biosense both design, manufacture, and sell medical devices to doctors and hospitals across the country. See Am. Compl. [Docket No. 43] ¶¶ 10–13. In particular, St. Jude sells a cardiac imaging and mapping system known as “EnSite,” designed to diagnose heart conditions such as atrial fibrillation, a cardiac arrhythmia. Biosense is a direct competitor of St. Jude, and sells a competitive cardiac mapping system known as “CARTO.” Id.

Both St. Jude and Biosense employ technical and sales personnel to market and support their cardiac mapping systems. Medical device companies expend significant resources to train and compensate their personnel not only because of the complex technology, but because an employee's relationship with a physician “is a major factor” in the physician's choice of medical products and company loyalty. Once a physician chooses to use a particular device, that company's sales and technical staff support the physician during each procedure involving the device. See id. ¶ 16.

In 2006, St. Jude hired Defendant de Castro as a Senior Field Clinical Engineer in California. De Castro executed a “term of years” agreement on May 1, 2006, in which he agreed to work for St. Jude for one year. Id. ¶ 17. In 2007, de Castro and St. Jude renewed this agreement for an additional year. See id.

On January 5, 2009, St. Jude promoted de Castro to Direct Sales Representative for atrial fibrillation products, placing him more squarely in a sales and marketing role. Id. ¶ 18. At the time of the promotion, de Castro entered into a second term of years agreement, this time for a two-year term. Id. Ex. A, at 1–9 (the “Agreement”). The parties agreed Minnesota law would apply to the contract, and that any lawsuit arising in connection with the Agreement would be litigated in Minnesota. Id. ¶¶ 10.G–H. St. Jude agreed it would not terminate de Castro except “for cause” during his term of employment. Termination for cause included conduct ranging from the commission of a felony to failing to meet sales quotas. Id. ¶¶ 2, 5.

In return, de Castro agreed not to compete with St. Jude during the term of his employment.³ De Castro agreed he would not directly or indirectly play any role in the sale of competing products to the customers he called upon for St. Jude. Id. ¶ 8. He was also bound to not disclose or use for his personal benefit any confidential information he obtained through his employment, including both technical and sales information. Id. ¶ 7. The Agreement had a “Survival of Provisions” clause, which stated these noncompetition and confidentiality clauses would “survive the termination of this Agreement for any reason.” Id. ¶ 6.C.

De Castro's sales territory consisted of 13 hospitals in and around San Francisco and San Jose, California, including a customer of particular value to St. Jude.⁴ In addition to his standard sales commissions, the Agreement specifically offered de Castro a bonus for achieving a certain sales revenue target with this customer. Id. Over the course of his employment for St. Jude, de Castro developed significant goodwill with the customer, including cultivating strong relationships with its physicians.

On January 3, 2011, St. Jude and de Castro extended the Agreement for an additional three-year term, until January 4, 2014. Id. Ex. A, at 10–12 (“Amendment No. 1”). Amendment No. 1 increased de Castro's compensation and narrowed his sales territory, placing a somewhat greater emphasis on key customers and physicians. See id.

In the meantime, St. Jude's competitor Biosense identified de Castro as a potential candidate for recruitment. Mark Bradford Decl. [Docket No. 152] (“Bradford Decl.”) Ex. 5. During 2011, Biosense communicated with de Castro numerous times about leaving St. Jude to sell Biosense products. See id. Through the course of these discussions, Biosense learned of de Castro's Agreement and its noncompetition provision. In January 2012, Biosense sent de Castro an “Agreement to Defend” letter. Biosense stated it believed the term of years and noncompetition provisions in de Castro's employment agreement with St. Jude to be unenforceable, and agreed to furnish de Castro with counsel if St. Jude ever sued him in connection with the Agreement. Id. Ex. 10.

In February 2012, de Castro accepted the position of Territory Manager with Biosense and signed the “Agreement to Defend.” See id. De Castro became responsible for sales in Biosense's San Francisco territory, which overlapped with his previous St. Jude territory and included former St. Jude customers. Id. Exs. 5, 9. On March 6, 2012, de Castro sent a resignation email to St. Jude, in which he also offered to return his laptop and other St. Jude equipment. Am. Compl. Ex. B. On the same day, Defendants filed a declaratory action in California state court seeking to invalidate the Agreement. Id. Ex. C.

Three days later, on March 9, 2012, St. Jude filed this action. Defendants moved to dismiss the Minnesota case or transfer it to the Central District of California [Docket No. 3], while St. Jude moved to enjoin the California case [Docket No. 5]. Although the Court found injunctive relief inappropriate, it enforced the Agreement's forum selection clause and determined venue was properly in Minnesota. Order, May 4, 2012 [Docket No. 25], 2012 WL 1576141. Shortly thereafter, Defendants withdrew their motion to dismiss or transfer this case. Although they continue to dispute the effect of the forum selection clause, Defendants have proceeded to litigatein this district. See Letter, May 29, 2012 [Docket No. 26].

This is not the first time St. Jude has filed suit against Biosense for allegedly poaching employees. In St. Jude Med. S.C., Inc. v. Biosense Webster, Inc., No. A13–0414, 2013 WL 5508389 (Minn.Ct.App. Oct. 7, 2013) (the “ Jackson ” case), St. Jude filed suit against Biosense and former St. Jude employee Kristine Jackson for breach of Jackson's term of years agreement. Judge John B. Van de North, Jr., of the Ramsey County District Court, applied Minnesota law and granted partial summary judgment in St. Jude's favor. The court found Jackson liable as a matter of law to St. Jude for breaching her agreement, and Biosense liable for tortiously interfering with Jackson's contract. See id. The Minnesota Court of Appeals recently affirmed. Id.

Similarly, in St. Jude Med. S.C., Inc. v. Biosense Webster, Inc., No. 62–CV–12–1704 (Ramsey Cnty. Dist. Ct. July 16, 2013) (the “ Sterling ” case), St. Jude filed suit against Biosense and former St. Jude employee Natalie Sterling in connection with Sterling's term of years agreement with St. Jude. Again, the state district court granted partial summary judgment in favor of St. Jude. The court found Sterling liable as a matter of law for breaching her term of years agreement, and Biosense liable for tortiously interfering with the agreement. See Bradford Decl. Ex. 3 ( Sterling Summary Judgment Order).

In this case, St. Jude alleges six claims: (1) breach of contract against de Castro; (2) tortious interference against Biosense; (3) breach of the Agreement and the duty of loyalty against de Castro; (4) tortious interference with prospective economic advantage against Defendants; (5) unjust enrichment against Biosense; and (6) civil conspiracy by Defendants.

The parties each move for partial summary judgment. As it did in the previous state court actions, St. Jude moves for a finding of liability as a matter of law on each of its claims. Defendants move to dismiss several claims and to exclude lost profits damages. In addition, St. Jude moves to exclude the testimony of all three of Defendants' expert witnesses.

III. DISCUSSION

A. Summary Judgment

Rule 56(c) of the Federal Rules of Civil Procedure states a court shall grant summary judgment if no genuine issue as to any material fact exists and the moving party is entitled to judgment as a matter of law. On a motion for summary judgment, the court views the evidence in the light most favorable to the nonmoving party. Ludwig v. Anderson, 54 F.3d 465, 470 (8th Cir.1995). If evidence sufficient to permit a reasonable jury to return a verdict in favor of the nonmoving party has been presented, summary judgment is inappropriate. Krenik v. Cnty. of Le Sueur, 47 F.3d 953, 957 (8th Cir.1995) (citations omitted). However, “the mere existence of some alleged factual dispute between the...