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Devon Robotics, et al v. Gaspar Deviedma

August 23, 2012


The opinion of the court was delivered by: Joyner, C.J.


This action is presently before the Court for disposition of Defendant Gaspar DeViedma's Motion for Summary Judgment (Doc. Nos. 81, 82 and 84), Defendant McKesson Corporation's Motion for Summary Judgment (Doc. No. 83) and Plaintiffs' Motion for Partial Summary Judgment Against Defendant McKesson Corporation (Doc. No. 85). For the reasons set forth in this Memorandum, the Court grants Defendant DeViedma's Motion for Summary Judgment in part and denies the Motion in part; grants Defendant McKesson's Motion for Summary Judgment in part and denies the Motion in part; and denies Plaintiffs' Motion for Partial Summary Judgment.


This case revolves around the entities seeking financial gain through the sale and distribution of two robotics medication preparation devices, both created by Health Robotics, S.r.l. ("HRSRL")-CytoCare and i.v. Station. *fn1 In August and September 2008, Devon Robotics acquired the rights to distribute these robotic devices in the North American market. We previously detailed the history surrounding this acquisition in Case Nos. 09-CV-1819 and 09-CV-4123, and incorporate this background by reference.

The present action involves the claims of Plaintiffs Devon Health Services ("DHS"), Devon Robotics, and Dr. John Bennett, the CEO of both entities (collectively "Devon") against Defendant Gaspar DeViedma ("DeViedma") and Defendant McKesson Corporation ("McKesson").

(1) Devon's Payment Obligations under the CytoCare Distribution Agreement Devon Robotics and HRSRL executed the CytoCare Distribution Agreement on September 12, 2008. DeViedma Mot. Ex. 5, Doc. No. 82. Under its terms, Devon Robotics agreed to pay "CytoCare License Fees" to HRSRL, defined as "the firm, guaranteed, and binding payment" of €15,232,988 "in consideration for the exclusivity for the Licensor Product from the Effective Date through the end of the Initial Exclusive Term." Id. at ¶ 1.2; ¶ 3.1. *fn2 The Distribution Agreement outlined the schedule of monthly fees due to HRSRL, starting in October 2008. Id. at ¶ 3.10.

The parties acknowledged that customer sales would significantly trail the License Fees payment schedule. Id. at ¶ 3.2. The Agreement could be terminated if either party failed to cure a material breach within thirty days of notice from the non-breaching party. Failure to comply with the obligations of ¶ 3.10, outlining the required licensing fees, constituted a material breach of the Agreement. Id. at ¶ 11.

Devon Robotics also agreed to a "Payment Guarantee," which required a $5 million "irrevocable, bank-issued standby Letter of Credit...provided no later than thirty (30) days after [September 15, 2008] a guarantee by [Devon] of the future full payment of the CytoCare License Fees in consideration for the grant of exclusivity." Id. at ¶ 1.33; ¶ 3.9. *fn3 "The format of the Payment Guarantee" was to "be as described in Schedule 9." Id. at ¶ 1.33. This attached Schedule provides a drafted example of the imagined "bank payment guarantee" to be made at the request of Devon Robotics. The suggested language states that the bank would: irrevocably and unconditionally undertake to pay [HRSRL] at first written demand, irrespective of the validity and the legal effects of the underlying Agreement and waiving all rights of objection and deference arising from said Agreement any amount not exceeding USD five-million ($5,000,000) upon receipt of your written confirmation that Devon Robotics LLC has failed to fulfill its contracting obligations 'failing to purchase and consequently missing full payment of any and/or all of the stipulated 'CytoCare License Fees' and therefore you [HRSRL] are entitled to claim payment for the amount requested under this guarantee. Id. at Sch. 9.

This contemplated bank guarantee was to be "governed and construed in accordance with Italian law, with place of jurisdiction as Bolzano, Italy." Id.

However, the parties never executed a bank payment guarantee that included this precise language or contained this choice-oflaw provision. Instead, on November 5, 2008, Devon executed a Guaranty Agreement with Itochu International, Inc. ("Itochu"), which was explicitly governed by New York law. *fn4 DeViedma Mot.

Exs. 6-8. This Guaranty Agreement is the only document in the record actually executed to extend the $5 million line of credit to HRSRL on Devon's behalf. Under the terms of this Guaranty Agreement, Devon "unconditionally guarantee[d]" to "duly and punctually" repay Itochu if HRSRL "properly effect[ed] a draw on the [$5 million] Letter of Credit for any reason other than the impending non-renewal of the Letter of Credit prior to January 15, 2013 upon the expiration of any then-current term." Id.

(2) The Confidential Disclosure and Non-Competition Agreement Between McKesson and Devon Robotics Late in 2008, Devon Robotics began negotiations with McKesson about a possible sublicense of a portion of the rights Devon Robotics held under the CytoCare Distribution Agreement with HRSRL. These negotiations led to a Confidential Disclosure\ and Non-Competition Agreement (hereinafter the "NDA"), which was executed by McKesson and Devon Robotics on December 22, 2008. See Devon Mot. Ex. B at MCK151667-70, Doc No. 85. This agreement barred McKesson from divulging or using any confidential information shared by Devon Robotics for any purpose other than analyzing a possible deal between the parties. The NDA broadly defines "confidential information" to include: trade secrets; conceptions; inventions; developments; intellectual property rights including patent applications, copyrights and trademarks; know-how; processes; technical data; specifications; proprietary market data; internal costs; supplier costs; pricing; contractual relationships; business methods; financial data; business projections; market and corporate strategies; and/or other proprietary information. NDA at ¶ 1.

The parties agreed that this obligation would last for one year and would survive the termination of the NDA for a period of three years.

After executing the NDA, Devon Robotics revealed proprietary information to McKesson, including marketing plans, business opportunities, and potential customers. McKesson confirms that much of this information was isolated and stored on a SharePoint website. The SharePoint website was designated "Project Derby," the code name assigned to the Devon Robotics deal. It remains unclear precisely what information was stored on this site.

(3) DeViedma Assumes Role of Chief Operating Officer of Devon Robotics From December 2008 until the summer of 2009, McKesson and Devon Robotics engaged in negotiations and proceeded with due diligence. On February 13, 2009, Bennett informed McKesson that Gaspar DeViedma had assumed the position of Chief Operating Officer (COO) at Devon Robotics and that McKesson should contact DeViedma in negotiating the partnership arrangement between the companies. See Devon Mot. Ex. C at Devon0138923.

DeViedma was general counsel for HRSRL, and in this capacity had negotiated Devon Robotics' distribution contracts for both CytoCare and i.v. Station robots. By February 2009, CytoCare robot sales were not performing as hoped. In order to help remedy poor sales performance, Devon Robotics brought in DeViedma, who had a great deal of experience marketing products in the medical automation field.

The morning of February 14, 2009, DeViedma sent an email to the staff of Devon Robotics, among others, entitled "First Communication from the Office of the COO, Devon Robotics." Resp. Ex. G at Itochu0027432-34. The email explains that in accord with Bennett's plans for the company, DeViedma was assuming the position of COO. According to DeViedma:

Dr. Bennett decided a few weeks back to institute the Office of the COO reporting to him directly. I will fill this office effective immediately but will share it with Werner Rainer [CEO of HRSRL] who will temporarily be moving to the United States to help with the challenges and opportunities the company faces. Between my time and Werner's we feel confident that we will spend sufficient time in the United States to provide a new fresh start for the company, and to provide Dr. Bennett with an infrastructure he can build around for the future. Dr. Bennett may indeed institute further changes to this Office of the COO or other responsibilities within the company. I will temporarily reside in Philadelphia and Werner will take temporary residence in San Francisco for this purpose and we will share these duties with other global duties we owe to [HRSRL]'s shareholders. Id.

After assuming responsibility for supervising the sales team members and implementing new strategies to improve outcomes, DeViedma closed the email by stating: "Look forward to seeing you on the 24 th and to help return the stockholders in Itochu and Devon the results they deserve." Id.

Apparently it was DeViedma who suggested the title of "Chief Operating Officer" instead of "President" when the two first discussed plans for DeViedma to take greater control of Devon Robotics. Bennett testified that DeViedma "needed to have all authority for all actions on the basis of the company." Pl. Resp. Ex. F. at 370:20-372:20, 396:16-397:10.

(4) The Second Amendment to the CytoCare Distribution Agreement

According to Devon, the Second Amendment was "the vehicle through which DeViedma was officially brought on as the Chief Operating Officer ("COO") of Devon Robotics around mid-February 2009." Resp. at 3, Doc. No. 90. However, we note that by its own terms the Second Amendment became effective March 1, 2009. Id. at Ex. E. The Second Amendment provides:

[Devon Robotics] hereby retains [HRSRL] and [HRSRL] hereby agrees to provide executive management consulting services to [Devon Robotics]. The services to be provided... shall be performed by Mr. Werner Rainer and by Mr. Gaspar DeViedma... Id. at § 40.1.

Under the terms of the Second Amendment, HRSRL undertook "overall executive management duties for Devon Robotics...including sales, marketing, installation, and support" and agreed to "report directly to the CEO, Devon International Group." Id. at § 40.5. Furthermore, "[a]ll Devon Robotics LLC and ITOCHU Med/Surg employees" were to report to HRSRL. Id. The provision of "executive management consulting services" was to last one year, renewable only with mutual written agreement between the parties. Id. at § 40.2. Either party could cancel the Second Amendment, and thus the provision of these services, for any reason, by giving 60 days written notice. Id. DeViedma was to reside within the United States at his own expense for a minimum of nine months and to devote a minimum of 220 days per year to this work. Id. at §§ 40.3, 40.4.

The Second Amendment did not establish a salary for DeViedma directly, but did provide that Devon Robotics would pay $250,000 to HRSRL annually for executive management consulting services. Id. at § 40.6. Devon Robotics also agreed to reimburse HRSRL for all reasonable direct travel and living expenses within the United States, though HRSRL remained responsible for travel and living expenses outside of this territory. Id. at § 40.7. These comprised the "sole and exclusive compensation for rendering executive consulting services to [Devon Robotics]." Id. at § 40.9. The parties dispute whether DeViedma agreed to non-payment of "consulting fees," but agree that Devon Robotics provided DeViedma and his family with health benefits.

Finally, the Second Amendment included a restatement of the CytoCare Distribution Agreement's obligations:

There are no other modifications to the Agreement. All terms and conditions of the Agreement not amended by this Second Amendment shall remain unaltered and in full force and effect. To the extent there is any conflict between the Agreement and the Second Amendment, the Second Amendment shall prevail. This Second Amendment may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. Id. at ¶ 2.

Rainer signed on behalf of HRSRL; Bennett signed on behalf of Devon Robotics. DeViedma did not sign this document, individually or on behalf of HRSRL.

(5) DeViedma's Role in the McKesson Negotiations

While DeViedma strongly contests that he owed a fiduciary duty to Devon Robotics, all agree that he worked on behalf of the company and oversaw various affairs. *fn5 Among these and acting as COO, DeViedma played a key role in the negotiations with McKesson.

By March 5, 2009, only two tasks remained outstanding in finalizing the deal between McKesson and Devon Robotics: drafting the definitive agreement and completing due diligence. According to Ben Sperling, the Director of Strategic Business Development at McKesson Automation and an executive engaged in negotiating on McKesson's behalf, DeViedma was the individual "obstructing McKesson's ability to complete the FDA due diligence trip to Italy" while making it "seem like [Bennett] was not happy" and therefore instructing DeViedma to prevent the visit. See Resp. Ex. P at 107:6-108:18. David Souerwine, the President of McKesson Provider Technologies and another executive negotiating on behalf of McKesson, also believed that, as of March 26, 2009, there was a deal between Devon Robotics and McKesson, and that the only "stumbling block" was DeViedma, who "was blocking [McKesson] from going to do the FDA diligence." See Resp. Ex. Q at 164:15-22, 183:6-185:3, 190:15-25.

According to McKesson, the company remained prepared to go through with the deal in early May 2009. Yet, DeViedma, while acting as COO, continued to stall McKesson's FDA due diligence observations of HRSRL's manufacturing facilities in Italy. On May 7, 2009, Souerwine wrote to Bennett, informing him that McKesson was "blocked earlier from completing the FDA due diligence" and still looking to schedule this trip. Resp. Ex. D at Devon0150386-87. When Bennett informed DeViedma of this, DeViedma responded: I am sorry [Bennett] but I am not going to agree to schedule the trip without a contract signed contingencies ok we have wasted enough time with other people and I will not distract Paolo. When I blocked the trip I meant it and there is absolutely nothing that will make me change my mind even you telling him he can schedule it. No contract no trip, sorry. Id.

Bennett told DeViedma that he thought this was the "wrong coarse [sic]" but would abide by the decision. Id. Despite continued efforts to negotiate the deal, McKesson and Devon Robotics never entered into an agreement for the sublicense of the rights to CytoCare.

(6) The Draw-Down of the $5 Million Line of Credit

On March 22, 2009, HRSRL notified Devon Robotics that it had materially breached the CytoCare Distribution Agreement by its "failure to pay within 30 days [HRSRL]'s Invoice for the February Franchise Fees in the amount of €219,951." See DeViedma Mot. Ex.

26. HRSRL instructed Devon that it had thirty days in which to cure this material breach, and that HRSRL "ha[d] elected, as the CytoCare Agreement permits, to call-in the Payment Guarantee described in Section 3.9 that Itochu International provided to [HRSRL]." Id. Rainer, on behalf of HRSRL, went on to further state:

We understand that said material breach comes as a result of funding disagreements with Itochu International. If these agreements are resolved within the 30-day cure period and the material breach is cured, we welcome a new agreement with Devon whereby the Payment Guarantee may be returned to Itochu International in consideration for the Issuance of a new Letter of Credit for the duration of the Term of the Agreement. If the material breach is not cured within the 30-day period, the Agreement shall be terminated for cause, and we may offer Devon and Itochu the possibility of executing a new Agreement within 30 days of termination. Id.

On or around March 31, 2009, HRSRL drew down the letter of credit in full, thereby immediately receiving $5 million. DeViedma Mot. Ex. 27. Shortly thereafter Itochu demanded Devon's payment of the full $5 million per the conditions of the November 5, 2008 Guaranty Agreement. Then on April 10, 2009, Itochu initiated litigation in federal court to recoup this amount, as well as an outstanding $4 million Itochu had loaned directly to Devon.

(7) End of DeViedma's Tenure as COO and the Fourth Amendment to the CytoCare Distribution Agreement

On June 5, 2009, DeViedma stopped serving as the COO of Devon Robotics. Several days later, HRSRL again advised Devon Robotics that the company was in material breach of the CytoCare Distribution Agreement for failure to pay franchise fees. Devon Robotics tried to resolve this situation, and hoped that cementing a deal with McKesson would also lead to a deal with HRSRL.

HRSRL and Devon Robotics executed a Fourth Amendment to the CytoCare Distribution Agreement on June 15, 2009, which rescinded Section 40 of the Second Amendment and clarified that the "executive management consulting services" had been terminated effective June 5, 2009. DeViedma Mot. Ex. 11. This time, DeViedma signed on behalf of HRSRL.

There is substantial evidence to show that the relationship between DeViedma and Bennett increased in hostility by July 2009. See, ...

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