Stryker Sales Corp. v. Zimmer Biomet, Inc.

• Decision Date: 31 January 2017
• Docket Number: No. 1:16–cv–01670–DAD–EPG,1:16–cv–01670–DAD–EPG
• Citation: 231 F.Supp.3d 606
• Parties: STRYKER SALES CORPORATION, Plaintiff, v. ZIMMER BIOMET, INC.; Zimmer Biomet CMF and Thoracic, LLC, d/b/a Biomet Microfixation LLC; and Tragus Surgical, Inc., Defendants.
• Court: U.S. District Court — Eastern District of California

231 F.Supp.3d 606

STRYKER SALES CORPORATION, Plaintiff,

v.ZIMMER BIOMET, INC.; Zimmer Biomet CMF and Thoracic, LLC, d/b/a Biomet Microfixation LLC; and Tragus Surgical, Inc., Defendants.

No. 1:16–cv–01670–DAD–EPG

United States District Court, E.D. California.

Signed January 31, 2017

Filed February 1, 2017

Robert Brian Milligan, Seyfarth Shaw, Los Angeles, CA, D. Andrew Portinga, PHV, David J. Gass, PHV, Miller Johnson PLC, Grand Rapids, MI, Kristine Rinella Argentine, PHV, Michael Dale Wexler, PHV, Seyfarth Shaw LLP, Chicago, IL, for Plaintiff.

Tarifa B. Laddon, Faegre Baker Daniels LLP, Los Angeles, CA, Joshua B. Fleming, PHV, Michael A. Rogers, PHV, Quarles & Brady LLP, Indianapolis, IN, for Defendants.

ORDER GRANTING IN PART DEFENDANT TRAGUS SURGICAL, INC.'S MOTION TO DISMISS; AND DENYING PLAINTIFF'S MOTION TO STAY AND MOTION TO CONTINUE HEARING

Dale A. Drozd, UNITED STATES DISTRICT JUDGE

This matter is before the court on three motions: defendant Tragus Surgical, Inc.'s motion to dismiss plaintiff's complaint (Doc. No. 29); plaintiff Stryker Sales Corporation's motion to stay proceedings pending resolution of issues in a related case (Doc. No. 33); and plaintiff's motion to continue the hearing on defendant's motion to dismiss (Doc. No. 47). A hearing on these motions was held on December 20, 2016. Attorney Robert Brian Milligan appeared on behalf of plaintiff Stryker Sales Corporation ("Stryker"). Attorneys Tarifa B. Laddon and Mike Rogers appeared on behalf of defendants Zimmer Biomet Inc. and Zimmer Biomet CMF and Thoracic LLC d/b/a Biomet Microfixation, LLC (collectively "Biomet"), and Tragus Surgical, Inc. ("Tragus"). Having considered the parties' briefs and oral arguments and for the reasons set forth below, the court will grant defendant's motion to dismiss in part, deny plaintiff's motion to stay these proceedings, and deny plaintiff's motion to continue the hearing on defendant's motion to dismiss.

BACKGROUND

Plaintiff Stryker commenced this action against defendants Biomet and Tragus on August 26, 2016, in the United States District Court for the Western District of Michigan. (Doc. No. 1.) According to the complaint, Stryker, a Michigan-based medical equipment manufacturer, hired Stephen Siroonian in 2012 as a sales representative for the "Fresno Territory," a geographic area within the Central Valley of California covering approximately six hospitals and medical centers, as well as fifteen craniomaxillofacial– and neuro-surgeons. (Id. ¶¶ 42, 45.)

In furtherance of that employment relationship, Mr. Siroonian and Stryker executed two agreements: the Stryker Confidentiality, Intellectual Property and Non–Solicitation Agreement (California Agreement); and the Stryker Confidentiality, Intellectual Property and Non–Solicitation Agreement (Standard Agreement) (collectively, the "Stryker Agreements"). (Id. ¶ 42, Exs. A–C.) The Stryker Agreements contain three notable contractual obligations owing to Stryker and its affiliated companies. First, pursuant to these agreements, Mr. Siroonian agreed not to "disclose, use, disseminate, identify by topic of subject, lecture upon or publish Confidential Information" he learned during his employment with Stryker, where the term "Confidential Information" is defined as "know-how, trade secrets, and technical, business and financial information and any other non-public information" (the "non-disclosure provision"). (Id. ¶¶ 48–49.) Second, Mr. Siroonian agreed that during the course of his employment with Stryker and for one year after termination, he would not solicit business from, contact, or sell any products or services to customers he had contact with during the last twenty-four months of his employment with Stryker (the "non-solicitation provision"). (Id. ¶ 51.) Third, Mr. Siroonian agreed not to compete with Stryker—by working as an employee, consultant, contractor, or agent for any competitor organization—during the course of his employment with Stryker and for one year after termination (the "non-competition provision"). (Id. ¶ 52.) The Stryker Agreements contained the following Michigan choice-of-law provision: "[T]he parties' performance hereunder and the relationship between them shall be governed by, construed and enforced in accordance with the laws of the State of Michigan without regard to the conflict of law rules thereof." (Id. ¶ 54.)

Plaintiff's complaint alleges that in August 2015, while he was still employed by Stryker, Mr. Siroonian contacted one of Stryker's competitors, Tragus, regarding potential employment. Mr. Siroonian provided copies of the Stryker Agreements to defendants. (Id. ¶¶ 55–58.) In October 2015, while negotiating a contractor agreement with Tragus, Mr. Siroonian received several requests for information from one customer, Fresno Community Hospital, but ignored those requests and hid them from Stryker's leadership. (Id. ¶ 90.) On October 30, 2015, Mr. Siroonian resigned from Stryker and indicated to Stryker's Central Valley territorial manager that he would be working for Tragus and selling a competing line of Biomet medical products. (Id. ¶¶ 66–69.) Shortly thereafter, Mr. Siroonian, on defendants' behalf, met with the Stryker customers he previously worked with to encourage them to convert to Biomet products. (See id. ¶¶ 70–96.)

On November 10, 2015, Stryker filed a complaint against Mr. Siroonian and his company Core Surgical, Inc. in the Western District of Michigan. See Stryker Sales Corp. v. Siroonian , No. 1:15–cv–01161, 2015 WL 12977365 (W.D. Mich. Nov. 30, 2015). Stryker's claims in the Siroonian action primarily concern Mr. Siroonian's alleged breach of the Stryker Agreements. (Doc. No. 33–1 at 2.) After obtaining discovery in that case, Stryker moved to amend its complaint to add Biomet and Tragus based on evidence which it claimed reflected that these companies were involved in Mr. Siroonian's scheme to erode Stryker's customer relationships. (Id. ) The district court denied Stryker's motion to amend. (Id. )

Unable to proceed against Biomet and Tragus in the Siroonian action, Stryker subsequently commenced the instant action in the Western District of Michigan. Plaintiff Stryker's complaint here alleges three state law causes of action: (1) tortious interference with contract, (2) tortious interference with business relationships, and (3) unfair competition. (Doc. No. 1.) On September 19, 2016, defendants Biomet and Tragus filed motions to dismiss Stryker's complaint, or in the alternative, to transfer the case to the Eastern District of California. (Doc. Nos. 10–13.) On November 2, 2016, the district court granted the motions to transfer the case to this court, without addressing the issues raised in the motions to dismiss. (Doc. No. 20.) Moreover, the district court in Michigan concluded that transfer of the case was appropriate without definitively holding whether venue was proper. (Id. at 1 ("[T]he Court finds that transfer of the case to the United States District Court for the Eastern District of California is appropriate under 28 U.S.C. § 1404(a), assuming venue is proper; or 28 U.S.C. § 1406, assuming it is not.").)

On November 16, 2016, after the case was transferred to this court, defendant Tragus again moved to dismiss the complaint for failure to state a claim. (Doc. No. 29.)¹ On December 6, 2016, plaintiff filed its opposition. (Doc. No. 44.) On December 13, 2016, Tragus filed a reply. (Doc. No. 48.) Separately, on November 22, 2016, plaintiff filed a motion to stay proceedings in this case pending the resolution of the Siroonian action in the Western District of Michigan. (Doc. No. 33.) On December 6, 2016, defendants filed their opposition. (Doc. No. 41.) On December 13, 2016, plaintiff filed a reply. (Doc. No. 46.) On the same day, plaintiff also filed a motion to continue the hearing on defendant Tragus's motion to dismiss pending the resolution of plaintiff's motion to stay. (Doc. No. 47.)

DEFENDANT TRAGUS'S MOTION TO DISMISS

The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal sufficiency of the complaint. N. Star Int'l v. Ariz. Corp. Comm'n , 720 F.2d 578, 581 (9th Cir. 1983). "Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1990). A plaintiff is required to allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). In determining whether a complaint states a claim on which relief may be granted, the court accepts as true the allegations in the complaint and construes the allegations in the light most favorable to the plaintiff. Hishon v. King & Spalding , 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984) ; Love v. United States , 915 F.2d 1242, 1245 (9th Cir. 1989).

With respect to defendants' motion to dismiss now before this court, the parties present two primary disputes about the appropriate state law to be applied in this case. First, the parties dispute whether the causes of action alleged in the complaint are governed by Michigan or California law. Second, the parties disagree as to whether the Stryker Agreements are valid and enforceable under the applicable state law. Defendant Tragus contends that because the Stryker Agreements are invalid and unenforceable under California law, and because each of the alleged causes of action requires the existence and breach of a valid and enforceable contract, plaintiff cannot proceed on any of its causes of action.

A. The Appropriate State Substantive Law

1. Choice of Law

Ordinarily, a federal court...