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D.T. Davis Enterprises, Ltd v. ARJO, Inc.

United States District Court, Third Circuit

September 30, 2013

D.T. DAVIS ENTERPRISES, LTD., doing business as HOVERTECH INTERNATIONAL, Plaintiff
v.
ARJO, INC., Defendant

DOUGLAS J. SMILLIE, ESQUIRE On behalf of Plaintiff

JEFFREY C. CLARK, ESQUIRE DAVID J. PIVNICK, ESQUIRE DANA WINDISCH CHILSON, ESQUIRE HARVEY FREEDENBERG, ESQUIRE ALAN R. BOYNTON, JR., ESQUIRE On behalf of Defendant

OPINION

JAMES KNOLL GARDNER, United States District Judge

This matter is before the court on Plaintiff’s Motion for a Temporary Restraining Order[1] and a Preliminary Injunction Pursuant to Fed.R.Civ.P. 65 (Document 4)(“Plaintiff’s Motion for Preliminary Injunction”), which motion was filed March 22, 2012.[2]Also before the court is the oral Motion for Judgment on Partial Findings, which oral motion was made on the record in open court on May 23, 2012 pursuant to Rule 52(c) of the Federal Rules of Civil Procedure after the close of plaintiff’s case-in-chief on the second day the three-day hearing on Plaintiff’s Motion for Preliminary Injunction.

SUMMARY OF DECISION

For the reasons expressed below, I deny Plaintiff’s Motion for Preliminary Injunction and grant defendant’s oral Motion for Judgment on Partial Findings. Specifically, I deny plaintiff’s motion and grant defendant’s oral motion because plaintiff materially breached the Distribution Agreement[3] by failing to provide defendant with access to sell plaintiff’s products in the United Kingdom. Because plaintiff materially breached the Distribution Agreement, plaintiff is not entitled to a preliminary injunction and defendant is entitled to judgment in its favor on plaintiff’s breach of contact claim asserted against defendant under the Distribution Agreement.

JURISDICTION

This court has diversity jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1332(a)(1). Plaintiff D.T. Davis Enterprises, Ltd., doing business as HoverTech International (“HTI”) is a citizen of Pennsylvania. Defendant Arjo, Inc. is a citizen of Delaware and Illinois. The amount in controversy exceeds $75, 000, exclusive of interest and costs.

VENUE

Venue is proper in this court pursuant to 28 U.S.C. § 1441(a) because plaintiff initiated its action against defendant in the Court of Common Pleas of Lehigh County, Pennsylvania, which is in this judicial district, and defendant removed the matter to this court.

Venue is also proper in this court pursuant to 28 U.S.C. § 1391(b)(1) because a substantial part of the events giving rise to plaintiff’s claims occurred in the City of Bethlehem, Pennsylvania, which is situated in both Lehigh and Northampton Counties. Both Lehigh County and Northampton County are located within this judicial district.

PROCEDURAL HISTORY

On March 8, 2012 plaintiff D.T. Davis Enterprises, Ltd., doing business as HoverTech International, filed its Complaint for Preliminary and Permanent Injunctive Relief in the Court of Common Pleas of Lehigh County, Pennsylvania. That same day, plaintiff HTI filed a motion seeking preliminary injunctive relief from the Lehigh County Court of Common Pleas. A hearing on HTI’s state-court motion was scheduled to commence before Judge William E. Ford of the Lehigh County Court of Common Pleas on Monday, March 19, 2012.

On Friday, March 16, 2012 defendant Arjo, Inc. (“Arjo”) filed its Notice of Removal[4] in this court.

On March 22, 2012 HTI filed Plaintiff’s Motion for Preliminary Injunction. That same day, United States District Judge Joel H. Slomsky, sitting as the emergency duty judge, conducted a telephone conference on the record with counsel for both parties. Following that telephone conference, Judge Slomsky issued an Order dated March 22, 2012 and filed March 23, 2012[5] which denied plaintiff’s motion only to the extent that it sought a temporary restraining order.

On April 5, 2012 Arjo filed Defendant’s Brief in Opposition to Plaintiff’s Motion for Preliminary Injunction.[6]

I conducted a three-day hearing on Plaintiff’s Motion for Preliminary Injunction on April 20, [7] May 23, and May 25, 2012.

During the first day of the preliminary injunction hearing, plaintiff made its opening statement and presented the testimony of David T. Davis, who is the President and owner of plaintiff HTI.

During the second day of the preliminary injunction hearing, plaintiff presented the testimony of Jerome T. Smith, who is the Chief Financial Officer and Chief Operating Officer of plaintiff HTI -- and admitted into evidence Plaintiff’s Exhibits 1 through 12, 13a. through g., 14 through 17, 18a. through f., and 19 through 37. Following the admission of its exhibits, plaintiff rested.

During the second day of the hearing, defendant admitted into evidence Defendant’s Exhibits 1 through 3, and 5 and made its oral Motion for Judgment on Partial Findings pursuant to Rule 52(c).

Defendant argued in support of its oral motion, and plaintiff argued in opposition. At the close of the argument concerning defendants’ oral motion, as noted on the record, I exercised my discretion under Rule 52(c) and declined to rule on defendant’s oral motion until after the close of the evidence.

Defendant made its opening statement and then presented the testimony of Sandy Hough, Senior Clinical Manager for Diligent Services at Arjo, and Andrew Hepburn, Senior Director for Diligent Services at Arjo, and admitted into evidence Defendant’s Exhibit 6.

On the third day of the preliminary injunction hearing, defendant presented the remainder of Andrew Hepburn’s testimony. Plaintiff’s Exhibit 38 was marked for identification during the Andrew Hepburn’s testimony but was not moved into evidence.

Following completion of Andrew Hepburn’s testimony, defendant moved for the admission of Defendant’s Exhibit 7, the Declaration of Dan Raffensberger, and plaintiff raised a hearsay objection. After hearing argument on the objection, I took the objection under advisement, but permitted the parties to make reference to Defendant’s Exhibit 7 in their closing arguments.

I now overrule the hearsay objection and Defendant’s Exhibit 7 is admitted into evidence.[8]

At the conclusion of the preliminary injunction hearing, I took Plaintiff’s Motion for Preliminary Injunction under advisement.[9]

Following the completion of the hearing, the parties submitted proposed findings of fact and conclusions of law and legal memoranda in further support of their respective positions.[10] The matter is now ripe for adjudication.

STANDARD OF REVIEW

Preliminary Injunction

The United States Court of Appeals for the Third Circuit has held that in determining whether to grant a preliminary injunction, I must consider

(1) whether the movant has shown a reasonable probability of success on the merits; (2) whether the movant will be irreparably injured by denial of the relief; (3) whether granting preliminary relief will result in even greater harm to the nonmoving party; and (4) whether granting the preliminary relief will be in the public interest.

Iles v. de Jongh, 638 F.3d 169, 172 (3d Cir. 2011); see also Minard Run Oil Company v. United States Forest Service, 670 F.3d 236, 249-250 (3d Cir. 2011). A plaintiff's failure to establish any of these four elements in its favor renders a preliminary injunction inappropriate. Nutrasweet Company v. Vit-Mar Enterprises, 176 F.3d 151, 153 (3d Cir. 1999).

Judgment on Partial Findings

Rule 52(c) of the Federal Rules of Civil Procedure provides:

(c) Judgment on Partial Findings. If a party has been fully heard on an issue during a nonjury trial and the court finds against the party on that issue, the court may enter judgment against the party on a claim or defense that, under the controlling law, can be maintained or defeated only with a favorable finding on that issue. The court may, however, decline to render any judgment until the close of the evidence. A judgment on partial findings must be supported by findings of fact and conclusions of law as required by Rule 52(a).

Rule 52(a) provides, in pertinent part:

(1) In General. In an action tried on the facts without a jury or with an advisory jury, the court must find the facts specially and state its conclusions of law separately. The findings and conclusions may be stated on the record after the close of the evidence or may appear in an opinion or a memorandum of decision filed by the court. Judgment must be entered under Rule 58.
(2) For an Interlocutory Injunction. In granting or refusing an interlocutory injunction, the court must similarly state the findings and conclusions that support its action.

In making a determination pursuant to Rule 52(c), I may make appropriate findings of fact and resolve disputed factual questions on a partial record. See Rego v. ARC Water Treatment Company of PA, 181 F.3d 396 (3d Cir. 1999).

FACTUAL FINDINGS

Based upon the testimony and exhibits received during the preliminary injunction hearing, and the pleadings and record papers in this matter, I make the following findings of fact.[11]

Parties

Plaintiff D.T. Davis Enterprises, Ltd., doing business as HoverTech International, (“HTI”) is a Pennsylvania corporation with its principal place of business in Bethlehem, Pennsylvania. HTI employs 23 people and primarily utilizes independent contractors to sell and market HTI products. David T. Davis is the founder and President of HTI.

HTI is in the business of selling safe patient handling products, which include inflatable mattresses used in the lateral transfer of patients in acute care (emergency department) settings as well as short- and long-term care settings.

The HoverMatt is one of HTI’s flagship products and is at the center of the parties’ dispute.

HTI is a leader in the field of patient air-transfer technology. Indeed, HTI products account for approximately 70% of the United States domestic market for patient lateral air transfer devices.

Defendant Arjo, Inc. (“Arjo”), also known as ARJOHuntleigh, North America, is a Delaware corporation with its principal place of business in Addison, Illinois. Arjo has an extensive sales network and employs approximately 4, 400 people worldwide.

Arjo is a patient-handling company which sells and distributes a range of health-care and patient-safety products. Arjo sells both consumable items, such as slippery sheets to assist in patient transfers, and capital goods. Among the capital goods sold by Arjo are beds, patient-handling lifts, ceiling-mounted lifts, bathing systems, therapy tanks, and deep-vein thrombosis garments.

Arjo sells a product called the “Maxi Air”, which is a single patient lateral air transfer product, similar in appearance and function to HTI’s HoverMatt.

In addition to individual product sales, Arjo markets a program called Diligent Services (“Diligent”) to its hospital and long-term-care-facility clients. The Diligent Services program is geared toward reducing the risk of injury to a medical facility’s staff and patients by integrating a range of equipment marketed by Arjo with training and consultation provided by Arjo’s clinical staff, which consists of various licenced health-care practitioners.

The Diligent Services program is one of Arjo’s flagship offerings and has been implemented at more than 600 health-care facilities across the United States.

Arjo has a strong presence in the United Kingdom’s healthcare market, particularly in the United Kingdom’s hospitals, or acute-care facilities. Arjo has a an extensive network of 40-50 sales representative in place in the United Kingdom, which would permit Arjo to begin selling or renting HTI’s products immediately upon gaining access to the United Kingdom under the Distribution Agreement.

The United Kingdom has safe-patient-handling laws, which have been in place since the 1990s and which requires hospitals and other healthcare facilities to have equipment available to assist in lifting and transporting patients. Consequently, there is a ...


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