The opinion of the court was delivered by: ROBERT KELLY, Senior District Judge
Presently pending before this Court is the Motion for Summary
Defendant GN ReSound North America, t/a GN ReSound Corporation ("GN").
For the following reasons, GN's Motion will be granted.
American Hearing Aid Associates, Inc. ("AHAA") filed a Complaint
on October 25, 2001. The eight-Count Complaint set forth claims for
breach of contract (Count I), breach of the implied covenant of good
faith and fair dealing (Count II), intentional interference with existing
contractual relations (Count III), intentional interference with
prospective economic advantage (Count IV), negligent interference with
prospective economic advantage (Count V), improper interference with
contract (Count VI), unjust enrichment (Count VII) and conversion (Count
VIII). At this stage in the litigation, the only Counts remaining are the
claims for breach of contract (Count I), breach of the implied covenant
of good faith and fair dealing (Count II) and conversion (Count VIII).
AHAA's claims are based on a business relationship between the parties
that soured over a competition for customers.
AHAA is a national hearing health care network of associates that is
comprised of independent hearing health care professionals (i.e.
audiologists, hearing aid dispensers, otolaryngologists, etc.). AHAA
offers a variety of services and incentives to AHAA Associates in order
to maintain its extensive network. For example, AHAA has developed
business relationships with manufacturers and suppliers of hearing
equipment and devices in order to provide valuable benefits to AHAA
Associates. "Once affiliated with [AHAA], Associates are eligible to
purchase hearing health care equipment and devices through AHAA at
substantial price discounts due to AHAA's ability to purchase such
equipment and devices in significantly greater volumes than the
Associates would be able to purchase independently." (Compl. ¶ 10).
In order to obtain volume discounts, AHAA contracts with manufacturers
and suppliers of hearing equipment and devices. The manufacturers and
suppliers benefit from these contracts because they obtain, through AHAA,
access to AHAA's national network of associates. Along with the volume
discounts, manufacturers and suppliers often offer bonuses and other
incentives to AHAA based on the number of purchases these AHAA network
members make through AHAA. These contractual incentives encourage AHAA to
persuade AHAA Associates to order equipment and devices from these
network affiliated manufacturers and suppliers in large volumes.
Outside of a membership fee of $150, AHAA does not charge its members
for many of the consultative and guidance services it provides. AHAA
Associates pay for services by making purchases through the AHAA network.
In turn, AHAA is compensated through the deep discounts (AHAA retains a
portion of any discount as profit) and other incentives it receives from
contracting manufacturers and suppliers.
GN is a global manufacturer of hearing health care equipment and
devices. Specifically, GN is one of the world's largest manufacturers of
hearing aids. GN sells its products through two different avenues. First,
GN maintains its own sales force throughout the United States and sells
its products directly to health care professionals. Second, GN works with
"buying groups," such as AHAA, to enhance product sales to these
professionals. The claims in the instant case center around these two
AHAA has contracted with GN (or it predecessor) since 1998 through a
series of agreements that have ranged from one year to three years in
duration. Each contract gave GN the right to sell its products through
AHAA to AHAA Associates. Morever, each contract compensated AHAA through
discounts on the purchase of GN products by AHAA Associates. Finally, by
offering financial rewards, the contracts encouraged AHAA to utilize its
sales force to meet certain volume sales targets in relation to GN
This current lawsuit arises out of a contract that GN and AHAA entered
into in May 2000 and amended in May 2001 (collectively the "Contract").
The Contract outlines that "[GN] manufactures and distributes a number of
different models of hearing instruments" and that AHAA "is in the
business of distributing and/or selling hearing instruments." (Pl.'s Mem.
Opp. Summ. J., Ex. 4). In terms of the relationship of the parties
established by this Contract, the agreement states that "the parties to
this [Contract] are independent contractors, and nothing in this
[Contract] is intended to create any relationship of partnership, joint
venture, employment, franchise, or agency between the parties."
(Id.). The Contract states that the parties purpose is "to
enter into an agreement pursuant to which [AHAA] may purchase hearing
instruments from [GN] for resale." (Id.). The agreement
specifically acknowledges that AHAA is a "member-based organization" and
that AHAA Associates "are entitled to purchase from [GN] through [AHAA]."
(Id., Ex. 5). As previously described, the Contract also
outlines the compensation that AHAA would receive from the arrangement
through discounts on GN products and volume-based sales incentives (i.e.
In June and July 2001, the relationship between GN and AHAA began to
deteriorate. Specifically, GN began to formulate a plan that would allow
it to bypass AHAA and the AHAA network when making future sales to health
care professionals. GN came to the conclusion that it would make better
economic sense for it to sell its health care equipment and devices
directly to health care professionals rather than through AHAA. This
formulated plan was called the "AHAA Exit Strategy" by upper-level GN
employees. (Jackson Dep. at 148). The plan called for the GN sales force
to approach AHAA Associates and encourage them to begin to purchase GN
products directly from GN rather than through AHAA. Notably, many of
these members had previously purchased products directly from GN. The
foundation of GN's plan to change the purchasing method of AHAA
Associates was to undercut the prices that AHAA was offering for GN
products and to offer other various promotions to these buyers. This
"AHAA Exit Strategy" was to be coordinated from GN headquarters in
Minnesota and the entire plan was to be kept secret from AHAA. As
conceded by GN, the ultimate goal of the "AHAA Exit Strategy" was to
"take as many accounts away from AHAA as possible." (Pl.'s Mot. Opp.
Summ. J. at 26).
In September 2001, GN put the "AHAA Exit Strategy" into action. The GN
sales force approached AHAA Associates and numerous AHAA Associates
switched to a direct purchasing line with GN. Thus, these customers began
bypassing the AHAA network when they made their purchases from GN. AHAA
alleges this conduct resulted in a substantial loss of ...