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Synthes, Inc., Synthes Usa Hq, Inc., Synthes Usa, LLC, Synthes Usa Sales, LLC, and Synthes Usa Products, LLC v. Emerge Medical

September 28, 2012

SYNTHES, INC., SYNTHES USA HQ, INC., SYNTHES USA, LLC, SYNTHES USA SALES, LLC, AND SYNTHES USA PRODUCTS, LLC, PLAINTIFFS,
v.
EMERGE MEDICAL, INC., JOHN P. MAROTTA, ZACHARY W. STASSEN, ERIC BROWN, AND CHARLES Q. POWELL, DEFENDANTS.
EMERGE MEDICAL, INC., COUNTERCLAIM-PLAINTIFF,
v.
SYNTHES, INC., SYNTHES USA HQ, INC. SYNTHES USA, LLC, SYNTHES USA SALES, LLC, AND SYNTHES USA PRODUCTS, LLC, COUNTERCLAIM-DEFENDANTS.



The opinion of the court was delivered by: Buckwalter, S.J.

MEMORANDUM

Currently pending before the Court is a Motion to Dismiss Counterclaims filed by Counterclaim-Defendants Synthes, Inc., Synthes USA HQ, Inc., Synthes USA, LLC, Synthes USA Sales, LLC, and Synthes USA Products, LLC ("Plaintiff" or "Synthes").*fn1 For the reasons which follow, the Motion is granted in part and denied in part.

I. RELEVANT FACTUAL HISTORY*fn2

Counterclaim-Plaintiff Emerge Medical, Inc. ("Emerge") is a Colorado for-profit corporation with its principal place of business in Colorado. (Countercl. Compl. ¶ 5.) Counterclaim-Defendant Synthes, a self-proclaimed "worldwide leader in the medical device industry," is a multi-national corporation that employs more than 10,000 people worldwide with a market cap value exceeding $22 billion. (Id. ¶ 6.)

In 2004, John Marotta-a defendant in the principal case-went to work for Synthes as a Sales Consultant in Arizona. (Id. ¶ 7.) Due to his efforts alone, Synthes's market share in Arizona increased fifteen fold by 2008. (Id.) A mere fraction of the sales attributable to Marotta involved Generic Device Fixation Hardware. (Id.) Marotta's achievements, however, came with great personal sacrifice and time away from his family. (Id.) Ultimately, due to his success, Synthes moved Marotta to Colorado to act as its Regional Manager. (Id. ¶ 8.)

Currently, Marotta is the Chief Executive Officer of Emerge, a company formed to sell generic but lot traceable drill-bits, guidewires, and surgical screws ("Generic Device Fixation Hardware") for which orthopedic surgeons have little-to-no brand preference and for which no intellectual property is attached. (Id. ¶ 9.) Emerge's products are lot-traceable because, unlike Synthes, Emerge engraves its Generic Device Fixation Hardware so upon removal or use in bone fixation it is clear who manufactured the product. (Id.) Emerge is a recently-formed company that has yet to turn a profit, in sharp contrast to Synthes which reported sales and earnings growth of 10% and 7% respectively for the first half of 2011. (Id. ¶ 10.)

According to the Counterclaim Complaint, Synthes is a monopoly in the Orthopaedic

Trauma space with over 50% market share. (Id. ¶ 11.) Emerge has engaged in the sale of Generic Device Fixation Hardware in territories where it is lawful to do so. (Id. ¶ 12.) Accordingly, there is no likelihood of consumer confusion with respect to any of the Generic Device Fixation Hardware laser marked by Emerge. (Id. ¶ 13.) Further, Emerge never made false representations in connection with the sale of Generic Device Fixation Hardware belonging to Synthes, or Generic Device Fixation Hardware similar or identical to that developed by Synthes. (Id. ¶ 14.) Nor has Emerge ever marketed as its own Generic Device Fixation Hardware belonging to Synthes that was either similar or identical in nature. (Id. ¶ 15.) In the process of conducting its business, Emerge has "introduced fair pricing to the marketplace with Generic Device Fixation Hardware while maintaining high standards of quality and lowering costs for its hospital partners." (Id. ¶ 16.)

Since the formation of Emerge, Synthes has purportedly attempted to thwart Emerge's success through the improper actions of its employees and agents. (Id. ¶ 17.) These actions include, but are not limited to, the dissemination of false, defamatory, libelous, and malicious information about Emerge's personnel and products, while using oppressive litigation tactics aimed at intimidating and eliminating Emerge. (Id.)

On March 4, 2011, Synthes initiated the current federal action against both John Marotta and Emerge Medical, Inc. essentially claiming that Marotta breached multiple employment agreements during the formation of Emerge. Emerge filed an Answer and Affirmative Defenses, but no Counterclaim. Thereafter, on March 6, 2012, Plaintiff filed an Amended Complaint adding three new defendants and setting forth thirteen causes of action, all in connection with various breaches by the Defendants of non-competition contracts and accompanying tort violations. In response, on April 3, 2012, Emerge filed its Answer and Counterclaim, alleging eight causes of action as follows:

(1) trade libel (id. ¶¶ 18--23); (2) tortious interference with prospective contractual relationships (id. ¶¶ 24--31); (3) unfair competition (id. ¶¶ 32--39); (4) illegal monopolization violating Section 2 of the Sherman Act (id. ¶¶ 40--50); (5) attempted monopolization violating section 2 of the Sherman Act (id. ¶¶ 51--61); (6) violation of section 13 of the Clayton Act (id. ¶¶ 62--75); (7) request for declaratory judgment on Synthes's claim of tortious interference with contract (id. ¶¶ 76--78); and (8) request for declaratory judgment on Synthes's claim of aiding and abetting a breach of fiduciary duty. (Id. ¶¶ 79--87.)

On May 18, 2012, Synthes filed a Motion to Dismiss Defendant and Counterclaim-Plaintiff Emerge Medical, Inc.'s Alleged "Abuse of Process" and Antitrust Counterclaims and, or, in the alternative, to Bifurcate and Stay All Proceedings and Discovery Related to Each Alleged Counterclaim. Emerge responded on June 4, 2012, and Synthes filed a Reply Brief on June 25, 2012, making this Motion ripe for judicial consideration.

II. STANDARD OF REVIEW

Under Rule 12(b)(6), a defendant bears the burden of demonstrating that the plaintiff has not stated a claim upon which relief can be granted. Fed. R. Civ. P.12(b)(6); see also Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), the United States Supreme Court recognized that "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555. Following these basic dictates, the Supreme Court, in Ashcroft v. Iqbal, 556 U.S. 662 (2009), subsequently defined a two-pronged approach to a court's review of a motion to dismiss. "First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 678. Thus, although "Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era . . . it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Id. at 678--79. Second, the Supreme Court emphasized that "only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 679. "Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. A complaint does not show an entitlement to relief when the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct. Id.; see also Phillips v. Cnty. of Allegheny, 515 F.3d 224, 232-34 (3d Cir. 2008) (holding that: (1) factual allegations of complaint must provide notice to defendant; (2) complaint must allege facts suggestive of the proscribed conduct; and (3) the complaint's "'factual allegations must be enough to raise a right to relief above the speculative level'") (quoting Twombly, 550 U.S. at 555)).

Notwithstanding these new dictates, the basic tenets of the Rule 12(b)(6) standard of review have remained static. Spence v. Brownsville Area Sch. Dist., No. Civ.A.08-626, 2008 WL 2779079, at *2 (W.D. Pa. July 15, 2008). The general rules of pleading still require only a short and plain statement of the claim showing that the pleader is entitled to relief and need not contain detailed factual allegations. Phillips, 515 F.3d at 233. Further, the court must "accept all factual allegations in the complaint as true and view them in the light most favorable to the plaintiff." Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006). Finally, the court must "determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Pinkerton v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002).

III. DISCUSSION

Via the present Motion, Synthes seeks dismissal of both Emerge's abuse of process counterclaims and its antitrust counterclaims. In addition, Synthes requests that this Court bifurcate and stay all of Emerge's alleged counterclaims and all related discovery. The Court first addresses the challenges to the abuse of process and the antitrust counterclaims and then turns to the bifurcation question.

A. Abuse of Process Counterclaims

In its Opening Memorandum, Synthes seeks dismissal of Emerge's purported "abuse of process" counterclaim. Emerge, however, has explicitly clarified that its Counterclaim Complaint includes no such claim, thus mooting this portion of Synthes's Motion to Dismiss. By way of its Reply Brief, Synthes now requests, under Federal Rule of Civil Procedure 12(f), that the Court strike any references to "oppressive litigation tactics" or "abuse of process" on the grounds that they are redundant, immaterial, and impertinent material.

Rule 12(f) of the Federal Rules of Civil Procedure provides that "the court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent or scandalous matter." Fed. R. Civ. P. 12(f). "The purpose of a motion to strike is to clean up the pleadings, streamline litigation, and avoid unnecessary forays into immaterial matters." McInerney v. Moyer Lumber and Hardware, Inc., 244 F. Supp. 2d 393, 402 (E.D. Pa. 2002). Although "[a] court possesses considerable discretion in disposing of a motion to strike under Rule 12(f)," such motions are "not favored and usually will be denied unless the allegations have no possible relation to the controversy and may cause prejudice to one of the parties, or if the allegations confuse the issues in the case." River Road Devel. Corp. v. Carlson Corp., No. Civ.A.89-7037, 1990 WL 69085, at *2 (E.D. Pa. May 23, 1990). Thus, striking a pleading or a portion of a pleading "is a drastic remedy to be resorted to only when required for the purposes of justice." DeLa Cruz v. Piccari Press, 52 F. Supp. 2d 424, 428 (E.D. Pa. 2007) (quotations omitted).

The paragraphs challenged by Synthes in this case read as follows:

1. These Counterclaims assert claims of trade libel, tortious interference with prospective contractual relationships, violations of Pennsylvania unfair competition law, violations of illegal monopolization under Section 2 of the Sherman Act, violations under Section 13 of the Clayton Act, abuse of process to address the malicious willful and unlawful conduct of Synthes.

17. Since the formation of Emerge, Synthes has attempted to thwart Emerge's success through the improper actions of Synthes' employees and agents. These actions include, but are not limited to, the dissemination of false, defamatory, libelous and malicious information about Emerge's personnel and products, while using oppressive litigation tactics aimed at intimidating and eliminating Emerge.

33. Counterclaim Defendants Synthes [sic] has wrongfully and intentionally attempted to thwart Emerge's rise in the orthopedic device business by engaging in a continuous course of conduct involving disseminating false and malicious information about Emerge's personnel and products while using oppressive litigation tactics aimed at intimidating and eliminating Emerge, wrongfully obtaining trade secret and other confidential information from Emerge, and unfairly competing in the orthopedic device business by, inter alia, making false and disparaging statements concerning Emerge and its products.

(Countercl. Compl. ¶¶ 1, 17, 33 (emphasis added).) Synthes now argues that such allegations must be stricken because they are not the basis for any counterclaim or for the relief Emerge seeks, and are thus "redundant, immaterial, [and] impertinent." (Synthes's Reply Br. 2 n.3.)

The Court, however, does not find the challenged allegations to be either completely irrelevant to the controversy or particularly impertinent or scandalous. Indeed, many of Emerge's claims against Synthes contend that the tortious acts were done intentionally, willfully and wantonly, or with a specific intent to injure Emerge. The allegations of "oppressive litigation tactics" and "abuse of process," while not forming the basis of any specific claim against Synthes, are used to exemplify Synthes's alleged continuing "state of mind." Moreover, Synthes has not identified-and this Court cannot discern-how the inclusion of such allegations would either prejudice it or confuse the issues in this case. Given the general reluctance to grant motions under Rule 12(f), the Court declines to strike the challenged language from the Counterclaim Complaint.

B. Antitrust Claims

Synthes next challenges Counts IV, V, and VI of the Counterclaim Complaint, which allege illegal monopolization violating Section 2 of the Sherman Act, 15 U.S.C. § 2, attempted illegal monopolization violating Section 2 of the Sherman Act, and violation of Section 13 of the Clayton Act as amended by the Robinson-Patman Act, respectively. The elements of these claims overlap in many respects. First, to state a claim for monopolization under Section 2 of the Sherman Act, a plaintiff "must allege '(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historical accident.'" Crossroads Cogeneration Corp. v. Orange & Rockland Utils., Inc., 159 F.3d 129, 141 (3d Cir. 1998) (quoting Schuylkill Energy Res. v. Pa. Power & Light Co., 113 F.3d 405, 412--13 (3d Cir. 1997)). Second, to state a claim for attempted monopolization under § 2 of the Sherman Act, a plaintiff must plead "'(1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power.'" Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 317 (3d Cir. 2007) (quoting Crossroads Cogeneration Corp., 159 F.3d at 141). Third and finally, Section 2(a) of the Robinson-Patman Act, a 1936 amendment to the Clayton Act, provides, in pertinent part, as follows:

It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality . . . where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination or with customers of either of them. . ..

15 U.S.C. § 13(a). "In order to establish a prima facie violation of section 2(a) of the Act, a plaintiff must demonstrate a reasonable possibility that a price difference may harm competition." J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1531 (3d Cir. 1990) (citingFalls City Indus., Inc. v. Vanco Beverage, Inc., 460 U.S. 428, 435 (1983)).

The pleading of these various elements is "subject to the notice-pleading standard of Federal Rule of Civil Procedure 8(a)(2), which requires only 'a short and plain statement of the claim showing that the pleader is entitled to relief.'" Broadcom Corp., 501 F.3d at 317 (quotation omitted). Antitrust claims are generally construed liberally, making the standard for dismissal under Rule 12 rigorous. McLain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232, 246 (1980); Hospital Bldg. Co. v. Trustees, 425 U.S. 738, 746 (1976); Knuth v. Erie--Crawford Dairy Coop. Ass'n, 395 F.2d 420, 423 (3d Cir. 1973). Because the specific facts and details are "largely in the hands of the alleged [monopolists]," seePoller v. Columbia Broad. Sys., 368 U.S. 464, 473 (1962), dismissals should be granted "very sparingly." SeeHosp. Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 746 (1976).

Nonetheless, facts must still be pled with reasonable particularity in order to permit an inference that a federal antitrust claim is cognizable, particularly given the "massive factual" nature of such claims. SeeAssoc. Gen. Contractors of Calif., Inc. v. Calif. State Council of Carpenters, 459 U.S. 519, 528 n.17 (1983); Commonwealth of Pa. ex. rel. Zimmerman v. PepsiCo, Inc., 836 F.2d 173, 179 (3d Cir. 1988). "[A] litigant must adumbrate in each counterclaim an intelligible definition of the elements of its antitrust claim, even under the liberal notice pleading requirements of the Federal Rules of Civil Procedure." Syncsort Inc. v. Sequential Software, Inc. 50 F. Supp. 2d 318, 328--29 (D.N.J. 1999) (quoting CCPI Inc. v. Am. Premier, Inc., 967 F. Supp. 813, 819 (D. Del. 1997)). As remarked by Judge Friendly of the United States Court of Appeals for the Second Circuit, "[a] mere allegation that defendants violated the antitrust laws as to a particular plaintiff and commodity no more complies with Rule 8 than an allegation which says only that defendant made an undescribed contract with the plaintiff and breached it, or a defendant owns a car and injured plaintiff by driving it negligently." Klebanow v. NY Produce Exch., 344 F.2d 294, 299 (2d Cir. 1965). "The factual specificity required for antitrust claims stems in part from the fact that the antitrust laws were designed for the 'protection of ...


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