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DT Consultants, LLC v. Howmedica Osteonics Corp.

United States District Court, D. Maryland

July 13, 2018

DT CONSULTANTS, LLC, Plaintiff,
v.
HOWMEDICA OSTEONICS CORP., et al., Defendants.

          MEMORANDUM OPINION

          George L. Russell, III, United States District Judge

         THIS MATTER is before the Court on Plaintiff DT Consultants, LLC's (“DT”) Motion for Partial Summary Judgment on Liability (ECF No. 4) and Defendants Howmedica Osteonics Corp. (“Howmedica”) and Stryker Corporation's (“Stryker”) Cross-Motion for Summary Judgment (ECF No. 18).[1] The Motions are ripe for disposition, and no hearing is necessary. See Local Rule 105.6 (D.Md. 2016). For the reasons outlined below, the Court will grant in part and deny in part DT's Motion and Defendants' Cross-Motion.

         I. BACKGROUND[2]

         DT is a consulting and information services company that licenses and sublicenses orthopedic databases and other medical intellectual properties to medical device companies and healthcare providers. (Compl. ¶ 2, ECF No. 1). In September 2011, DT entered into a Database License Agreement with Duke University. (Id. ¶ 7). The agreement permitted DT to sublicense an orthopaedic database and its underlying data (the “Database”) that Duke and Dr. James Nunley, II, the Chief of Duke's Department of Orthopaedic Surgery developed. (Id. ¶¶ 7, 11; Pl.'s Mot. Partial Summ. J. [“Pl.'s Mot.”] Ex. 1 [“Sublicense”] at App. A, ECF No. 4-1).

         In October 2012, DT entered into a Database Sublicense Agreement (the “Sublicense” or “Agreement”) with Howmedica's predecessor-in-interest, Small Bone Innovations, Inc. (“SBI”). (Mitchell Decl. ¶ 4, ECF No. 18-3; Compl. ¶ 8). The Sublicense granted SBI permission to use the Database. (Compl. ¶ 9). The Sublicense provides that its term “shall be in perpetuity.” (Sublicense § 6.1). In exchange for the Sublicense, SBI agreed to pay DT a $300, 000.00 upfront cash royalty. (Id. § 4.1). SBI also agreed to pay a $36, 000.00 annual “Update Royalty” “so long as” SBI: (1) “shall receive in any calendar year during the term of th[e] [Sublicense] the written commitment or agreement” from Dr. Nunley or a “qualified colleague” to Update[3] the Database during that calendar year; and (2) “shall receive during that calendar year an Update of the Database” from Dr. Nunley or a “qualified colleague.” (Id.; Mitchell Decl. ¶ 16). The terms of the Sublicense dictate that SBI would pay the $36, 000.00 Update Royalty in four quarterly $9, 000.00 installments (the “Quarterly Payments”) from April 1, 2013 to January 1, 2017. (Sublicense § 4.1). Starting on January 1, 2017, and for all subsequent years, SBI and DT agreed that the Quarterly Payment amount would increase by five percent compounded annually. (Id.).

         In August 2014, Defendants purchased certain assets from SBI. (Mitchell Decl. ¶ 5). As part of the asset purchase, Defendants entered into Bill of Sale and Assignment and Assumption Agreement (the “Assignment Agreement”) with SBI, under which Howmedica assumed SBI's rights and obligations under the Sublicense. (Defs.' Opp'n Pl.'s Mot. Partial Summ. J. & Cross-Mot. Summ. J. [“Defs.' Opp'n & Cross-Mot.”] Ex. B [“Assignment Agreement”], ECF No. 18-3; Mitchell Decl. ¶ 5). Defendants then paid the required Quarterly Payments on July 22, August 18, and November 16, 2015, and February 23, July 11, and October 17, 2016. (Pl.'s Reply Ex. B at 2-9 [“Reicher Decl.”] ¶ 25, ECF No. 28-2).[4]

         On December 28, 2016, DT received a termination notice from Defendants. (Pl.'s Mot. Ex. 2 [“Termination Letter”], ECF No. 4-2). In the letter, titled “Termination of Duke Database Sublicense Agreement, ” Howmedica[5] states that it “hereby provides notice that it is terminating the Agreement” as of the date of the letter. (Id.). On January 6, 2017, DT sent Defendants a response indicating that their attempt to terminate the Sublicense was “wrongful, ” “in breach of the Agreement, ” and “of no force and effect.” (Jan. 6, 2017 Letter at 2, ECF No. 4-3). DT also demanded that Howmedica “comply with the terms and conditions of the Agreement for its stated term and promptly retract its stated ‘Termination' of the Agreement.” (Id.). On February 8, 2017, Defendants responded, asserting that under Maryland law “contract[s] with a perpetual term do not last forever; rather such a contract is interpreted as contemplating performance for a reasonable time” and “are terminable at will by either party.” (Feb. 8, 2017 Letter at 1, ECF No. 4-4).

         Also on January 6, 2017, Dr. Nunley sent Defendants a letter to “serve as the written commitment” to update the Database in 2017. (Pl.'s Reply Ex. B at 75-76 [“Nunley Letter”] at 1, ECF No. 28-2; Pl.'s Reply Ex. B at 11-15 [“Nunley Decl.”] ¶¶ 24-25, ECF No. 28-2). Despite sending DT a termination notice in December 2016, Howmedica remitted the first 2017 Quarterly Payment on January 19, 2017. (Reicher Decl. ¶ 34 n.1). Howmedica did not, however, make the second Quarterly Payment in April 2017. (See id. ¶ 34). Nevertheless, on July 5, 2017, DT sent Howmedica the 2017 Second Quarter Database Update. (Pl.'s Reply Ex. B at 78 [“2017 Update”]; Nunley Decl. ¶ 26). On July 12, 2017, Howmedica rejected DT's attempt to deliver the Database Update. (Albu Decl. Ex. A, ECF No. 35-1).

         Meanwhile, on June 20, 2017, Howmedica provided DT with written correspondence stating that it “terminated the Sublicense on December 28, 2016” and that it “no longer desires to receive any annual written commitment or agreement to update the database under the Sublicense.” (Defs.' Opp'n & Cross-Mot. Ex. 1 at 72-73 [“June 20, 2017 Letter”], ECF No. 18-3).

         On June 21, 2017, DT sued Howmedica and Stryker. (ECF No. 1). In its two-count Complaint, DT alleges: Breach of Contract (Breach of the Agreement) (Count I); and Breach of Contract (Contractual Indemnification) (Count II). (Compl. ¶¶ 26-36). DT seeks money damages and attorney's fees and costs. (Id. ¶¶ A-C).

         The same day DT filed suit, it filed a Motion for Partial Summary Judgment on Liability. (ECF No. 4). Defendants filed their Opposition and Cross-Motion for Summary Judgment on August 14, 2017. (ECF No. 18). DT filed its combined Reply in support of its Motion and Opposition to Defendants' Cross-Motion on September 19, 2017. (ECF No. 28). On October 10, 2017, Defendants filed a Reply in support of their Cross-Motion. (ECF No. 35).

         II. DISCUSSION

         A. Standards of Review

         1. Rule 56

         In reviewing a motion for summary judgment, the Court views the facts in a light most favorable to the nonmovant, drawing all justifiable inferences in that party's favor. Ricci v. DeStefano, 557 U.S. 557, 586 (2009); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970)). Summary judgment is proper when the movant demonstrates, through “particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations . . . admissions, interrogatory answers, or other materials, ” that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a), (c)(1)(A). Significantly, a party must be able to present the materials it cites in “a form that would be admissible in evidence, ” Fed.R.Civ.P. 56(c)(2), and supporting affidavits and declarations “must be made on personal knowledge” and “set out facts that would be admissible in evidence, ” Fed.R.Civ.P. 56(c)(4).

         Once a motion for summary judgment is properly made and supported, the burden shifts to the nonmovant to identify evidence showing there is genuine dispute of material fact. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). The nonmovant cannot create a genuine dispute of material fact “through mere speculation or the building of one inference upon another.” Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985) (citation omitted).

         A “material fact” is one that might affect the outcome of a party's case. Anderson, 477 U.S. at 248; see also JKC Holding Co. v. Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001) (citing Hooven-Lewis v. Caldera, 249 F.3d 259, 265 (4th Cir. 2001)). Whether a fact is considered to be “material” is determined by the substantive law, and “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson, 477 U.S. at 248; accord Hooven-Lewis, 249 F.3d at 265. A “genuine” dispute concerning a “material” fact arises when the evidence is sufficient to allow a reasonable jury to return a verdict in the nonmoving party's favor. Anderson, 477 U.S. at 248. If the nonmovant has failed to make a sufficient showing on an essential element of her case where she has the burden of proof, “there can be ‘no genuine [dispute] as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

         2. Cross-Motion for Summary Judgment

         When the parties have filed cross-motions for summary judgment, the court must “review each motion separately on its own merits to ‘determine whether either of the parties deserves judgment as a matter of law.'” Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (quoting Philip Morris Inc. v. Harshbarger, 122 F.3d 58, 62 n.4 (1st Cir. 1997)). Moreover, “[w]hen considering each individual motion, the court must take care to ‘resolve all factual disputes and any competing, rational inferences in the light most favorable' to the party opposing that motion.” Id. (quoting Wightman v. Springfield Terminal Ry. Co., 100 F.3d 228, 230 (1st Cir. 1996)). This Court, however, must also abide by its affirmative obligation to prevent factually unsupported claims and defenses from going to trial. Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993). If the evidence presented by the nonmovant is merely colorable, or is not significantly probative, summary judgment must be granted. Anderson, 477 U.S. at 249-50.

         B. Analysis

         1. Breach of Contract

         Under Maryland law, [6] to establish a breach of contract claim, the plaintiff must allege: (1) “that the defendant owed the plaintiff a contractual obligation”; and (2) “that the defendant breached that obligation.” Palermino v. Ocwen Loan Servicing, LLC, No. TDC-14-0522, 2015 WL 6531003, at *4 ...


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