Zimmer Spine, Inc. v. EBI, LLC et al
Filing
21
ORDER. Motion to Dismiss filed by Defendants, EBI, LLC (Biomet) and Adam Veri (Veri), seeking dismissal of four of the claims for relief asserted against them by Plaintiff, Zimmer Spine Inc. (Zimmer Spine) in its amended complaint 13 is GRANTED IN PART AND DENIED IN PART. Defendants Motion to Dismiss, filed on 2/14/2011, seeking dismissal of Plaintiffs previously-filed Complaint 7 is DENIED AS MOOT. By Judge Lewis T. Babcock on 9/14/2011.(sah, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
LEWIS T. BABCOCK, JUDGE
Civil Case No. 10-cv-03112-LTB-CBS
ZIMMER SPINE, INC.,
Plaintiff,
v.
EBI, LLC (d/b/a Biomet Spine, Biomet Trauma, Biomet Bracing, and Biomet Osteobiologics),
and ADAM VERI,
Defendants.
______________________________________________________________________________
ORDER
______________________________________________________________________________
This matter is before me a Motion to Dismiss filed by Defendants, EBI, LLC (“Biomet”)
and Adam Veri (“Veri”), seeking dismissal of four of the claims for relief asserted against them
by Plaintiff, Zimmer Spine Inc. (“Zimmer Spine”) in its amended complaint. [Doc # 13]
Specifically, Defendants ask that I dismiss the following claims asserted by Zimmer Spine for
failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6):
Intentional Interference With Business Relationships by both Defendants and Biomet Spine
individually [Counts II & III]; Violation[s] of Colorado Uniform Trade Secrets Act [Count V];
and Unjust Enrichment [Count VI]. Oral arguments would not materially assist me in my
determination. After consideration of the parties’ arguments, and for the reason stated, I GRANT
IN PART and DENY IN PART the motion.
I. Facts
The underlying facts of this case, as taken from the amended Complaint [Doc #10], are as
follows. Zimmer Spine is in the business of developing, manufacturing, and selling spine care
medical products and related services. It contracts with independent distributors, or “sales
representatives,” who, in turn, employ sales personnel to sell Zimmer Spine’s products to
physicians and hospitals. In an agreement effective January 1, 2009, Pro Medical, LLC, and its
owner, Frank Wainright, agreed to serve as Zimmer Spine’s sales representative in the territory of
Colorado, Montana, and Wyoming, which was later expanded to include some or all of Nevada
and Utah. Defendant Adam Veri was a sales manager with Pro Medical, who sold Zimmer Spine
products.
In the Fall of 2010, Veri began soliciting Pro Medical sales personnel who were
representing Zimmer Spine, to switch and begin working for Defendant Biomet, a direct
competitor of Zimmer Spine. In so doing, Veri asked the sales personnel what business they
thought they could “steal away” from Zimmer Spine and bring with them to Biomet. During this
time, on September 13, 2010, Veri formed his own company, GIO Medical.
On November 18, 2010, Wainright faxed a letter to Zimmer Spine claiming to terminate
their agreement to be Zimmer Spine’s sales representatives. Zimmer Spine asserts that this
termination was wrongful. On the same day, Wainright called an “emergency” meeting of Pro
Medical’s sales personnel, and announced that Pro Medical was terminating its relationship with
Zimmer Spine. Following this announcement, it is alleged that Veri spoke and gave an
approximately hour-long PowerPoint presentation about Biomet, and then conducted a “product
fair” of Biomet’s products, to Pro Medical’s sales personnel. He then offered employment
contracts with GIO Medical to the individual sales personnel to sell Biomet products “including
to their Zimmer Spine customers.” These employment offers included increased commission
rates and up-front signing bonuses.
2
In response, Zimmer Spine representatives traveled to Colorado to meet with the Pro
Medical sales personnel to offer them direct employment with Zimmer Spine. Zimmer Spine
asserts that although it has succeeded in signing many of the sales personnel, “it has done so at
tremendous cost and after incurring significant damages, including signing bonuses and the
equivalent of higher guaranteed commission rates.” In addition, Zimmer Spine contends that
Biomet and Veri have repeatedly gone back to the sales personnel and steadily increased their
employment offers.
In its amended complaint, Zimmer Spine alleges that Defendants “undertook a calculated
scheme to interfere with [its sales agreement with Pro Medical and Wainright] to deprive Zimmer
Spine of the benefits of the unique skills and abilities it had contracted for, and to steal the
business, customer relationships, and goodwill that Zimmer Spine had built through Pro Medical
and Wainright.” [Doc # 10, ¶ 35] Zimmer Spine claims that Defendants have: intentionally
interfered with contractual obligations; intentionally interfered with business relationships (both
Defendants and Biomet acting individually); engaged in civil conspiracy; violated the Colorado
Uniform Trade Secrets Act; and have been unjustly enriched. In this motion, Defendants seek
dismissal of four of the claims brought by Zimmer Spine against them pursuant to Fed. R. Civ. P.
12(b)(6).
My jurisdiction over these state law claims is based on diversity of citizenship. As a
federal court sitting in diversity jurisdiction, my role is to ascertain and apply the proper state law,
here that of Colorado, with the goal of insuring that the result obtained is the one that would have
been reached in the state courts. Occusafe, Inc. v. EG&G Rocky Flats, Inc., 54 F.3d 618, 621
(10th Cir. 1995).
3
II. Standard of Review
When deciding a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the court must assume
the truth of all well-pleaded facts in the complaint, and draw all reasonable inferences therefrom
in the light most favorable to the plaintiff. Teigen v. Renfrow, 511 F.3d 1072, 1078 (10th Cir.
2007); David v. City & County of Denver, 101 F.3d 1344, 1352 (10th Cir. 1996). A complaint
will survive dismissal if it alleges a plausible claim for relief – that is, the “[f]actual allegations
must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The concept of “plausibility” at the
dismissal stage refers not to whether the allegations are likely to be true; the court must assume
them to be true. Rather, “[t]he question is whether, if the allegations are true, it is plausible and
not merely possible that the plaintiff is entitled to relief under the relevant law.” Christy Sports,
LLC v. Deer Valley Resort Co., Ltd., 555 F.3d 1188, 1192 (10th Cir. 2009)(citing Robbins v.
Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008)).
III. Intentional Interference With Business Relationships [Counts II & III]
Defendants first assert that Zimmer Spine’s claims against them for Intentional
Interference With Business Relationships fail, as a matter of law, because the amended complaint
does not allege sufficient facts showing either: 1) the existence of a business relationship between
Pro Medical’s sales representatives and Zimmer Spine, or 2) that Defendants interfered with any
such relationship using “wrongful means.”
To state a claim for intentional interference with contractual relations or prospective
business advantage, a plaintiff must allege facts in support of the following elements: (1) the
existence of a valid contract or reasonable prospect of having a business relationship; (2) that the
4
defendant knew of the contract or prospective relationship; (3) the defendant intended to induce a
breach of the contract or interfere with the prospective business relationship; (4) defendants
engaged in conduct which produced a breach of contract or prevented the plaintiff from acquiring
or continuing a prospective business relationship; (5) the interference was improper; and (6) the
plaintiff suffered damages. Memorial Gardens, Inc. v. Olympian Sales & Management
Consultants, Inc., 690 P.2d 207, 210 (Colo. 1984); see also Amoco Oil Co. v. Ervin, 908 P.2d
493, 500 (Colo. 1995). Interference with contractual relations and interference with prospective
business relations requires identical elements, with the exception that an existing contract need
not be alleged for interference with prospective business relations. Rather, a plaintiff “must show
that there was a reasonable likelihood that a contract would have resulted but for the wrongful
interference.” Campfield v. State Farm Mut. Auto. Ins. Co., 532 F.3d 1111, 1122 (10th Cir.
2008)(quoting Klein v. Grynberg, 44 F.3d 1497, 1506 (10th Cir. 1995)).
A. Established and/or Prospective Business Relationship
Zimmer Spine is asserting a claim against both Defendants for interference with its
relationship with the sales personnel at Pro Medical who were selling Zimmer Spine’s products
(Count II). In addition, it is asserting a claim against Biomet alone for interference with Zimmer
Spine’s relationship with Defendant Veri, as a sales person who sold Zimmer Spine products at
Pro Medical (Count III). Zimmer Spine argues that it has alleged it has both an established and
prospective business relationship with the sales personnel, including Veri. Specifically, the
amended complaint alleges that Zimmer Spine had a “prospective contractual relationship,
independently enforceable third-party beneficiary rights, or prospective independently
enforceable third-party beneficiary rights with Pro Medical sales personnel.” [¶ 96]
5
Zimmer Spine asserts that its amended complaint alleges a relationship existed between
itself and the sale personnel which arose out of the sales agreement with Pro Medical/Wainright.
That alleged relationship was created as a result of the fact that the sales personnel offered,
promoted and sold Zimmer Spine’s products and services, they were entrusted with its
confidential trade secret information, and they were responsible for protecting and enhancing its
reputation and goodwill with its customers. [¶¶ 3, 4, 19-21, 24] Because of the close nature of
the established relationship, and the significant sales and customer service responsibilities
extended to Pro Medical’s sales personnel, Zimmer Spine argues that it included provisions in the
sales agreement that “established a continuing, prospective business relationship with Pro
Medical’s sales personnel.” Zimmer Spine specifically refers to Sections 10 and 32 of the sales
agreement. Section 10 required Pro Medical to cause each of its sales personnel to execute
covenants against disclosure of confidential information, competition against Zimmer Spine, and
solicitation of its customers. Section 32 required Pro Medical to enforce its restrictive covenants
against its sales personnel for the benefit of Zimmer Spine upon termination of the sales
agreement. [¶ 27]
I first reject Zimmer Spine’s argument to the extent that they argue that they had an
established business relationship with the sales personnel based on Zimmer Spine’s and Pro
Medical/Wainright’s sales agreement. Contrary to Zimmer Spine’s assertion, Pro Medical’s
obligations under the sales agreement pertaining to its employees cannot support a business
relationship between Zimmer Spine and those employees. See Campfield v. State Farm, supra,
532 F.3d at 1122 (a “claim of tortious interference with current business relations requires [the
plaintiff] to show: (1) he had a contract with a third party ...”). I likewise reject Zimmer Spine’s
6
argument that it had an established relationship grounded in the “close nature of the established
relationship and the significant sales and customer service responsibilities extended to Pro
Medical’s sales personnel.” Because there is no contractual relationship between Zimmer Spine
and the sales personnel at Pro Medical, I agree with Defendants that Zimmer Spine has failed to
allege an interference claim based on an established or current business relationship.
To the extent that Zimmer Spine alleges Sections 10 and 32 “conferred express,
independently enforceable third-party beneficiary rights upon Zimmer Spine” sufficient to infer a
business relationship with the sales personnel, I again disagree. Zimmer Spine has failed to
provide me with any legal authority that supports the proposition that the restrictive convents in
its agreement with Pro Medical created a third-party right that, in turn, supports an inference of an
established business relationship between Zimmer Spine and the sales personnel at Pro Medical.
The question that remains, then, is whether Zimmer Spine has asserted a prospective
business relationship with the sales personnel at Pro Medical, by alleging facts to support a
“reasonable likelihood that a contract would have resulted but for the wrongful interference.” See
Campfield v. State Farm, supra, 532 F.3d at 1122. Defendants argue that Zimmer Spine has
failed to allege facts supporting a reasonable likelihood, but rather have only alleged a “mere
hope” of such future relationship. See Klein v. Grynberg, supra, 44 F.3d at 1506 (to allege “a
reasonable likelihood or probability that a contract would have resulted; there must be something
beyond a mere hope”)(citations omitted).
The amended complaint alleges that Section of 32 of the sales agreement obligated Pro
Medical/Wainright to “take all such actions and sign all such documents as are necessary to
facilitate the transition of” Pro Medical’s business for Zimmer Spine in the event the agreement
7
was terminated [¶ 78], and, if the sales personnel chose not to enter into a relationship with
Zimmer Spine, Wainright was required to enforce the non-compete agreements against the sales
personnel to the extent permitted by law under Section 10. [¶ 96] Defendants maintain that the
contractual provisions at issue obligated Pro Medical/Wainright, but that Zimmer Spine has not
shown that such obligations create a protectable prospective relationship between them and the
sales personnel who “were total strangers” to the sales agreement. Defendants also refer me to
the language in Section 10 – which provides that Wainright had sole control and responsibility for
“the hiring and discharge” of it employees – and which Defendants argue indicates Zimmer
Spine’s disclaimer of any interest in or relationship with the sales personnel. Finally, Defendants
note that the sales personnel at issue sold products for various other manufacturers.
I conclude that Zimmer Spine has failed to allege sufficient facts to withstand dismissal
for failure to state a claim related to a prospective business relationship with the Pro Medical
sales personnel that sold its products. The fact that Pro Medical/Wainright agreed to provide
Zimmer Spine access to the employees that sold its products and, in addition, enforce noncompete clauses against them in the event of termination of the sales agreement, is only evidence
to support the inference of a possibility or mere hope, not a reasonable likelihood, that a future
contract might have resulted between Zimmer Spine and the individual sales personnel. The
provisions in the sale agreement – which only obligate Zimmer Spine and Pro Medical/Wainright
– are not sufficient to support a reasonable liklihood of a future relationship and, as such, fails to
state a plausible claim for relief. See Hertz v. Luzenac Group, 576 F.3d 1103, 1119 (10th Cir.
2009)(upholding a ruling that the plaintiff only demonstrated a “mere hope” of engaging in any
future business deals with a third party when it expressed only an interest in the plaintiff’s
8
business, and indicated that it would consider the invention in several months); Klein v.
Grynberg, supra, 44 F.3d at 1506 (upholding a finding that the prospective relationships alleged
were too speculative when there was no evidence that the plaintiff had an ongoing relationship
with any of the investors, beyond one meeting each, or that any of the prospective investors had
the intent to finance his invention).
Therefore, I reject Zimmer Spine’s argument that the amended complaint alleges facts
sufficient to support either an established business relationship with the sales personnel who were
selling Zimmer Spine’s products at Pro Medical (including Defendant Veri) – based on either an
actual contract or a third-party beneficiary relationship – or the reasonable likelihood of a
prospective business relationship with that personnel.
B. Wrongful Means
I also conclude that even if Zimmer Spine alleged sufficient facts to support the existence
of a prospective business relationship, the amended complaint fails on its face to allege that
Defendants used “wrongful means” to improperly interfere with that relationship sufficient to
overcome the competitor’s privilege defense.
The competitor’s privilege dictates that a “plaintiff cannot sue one of its competitors for
intentional interference in prospective economic advantage.” Occusafe v. EG&G Rocky Flats,
supra, 54 F.3d at 622-23 (citing Memorial Gardens v. Olympian Sales, supra, 690 P.2d at
210-11). Specifically, the competitor’s privilege provides that a defendant does not engage in
improper conduct, so as to be liable for intentional interference, if: “(1) it concerns a matter of
competition between the defendant and plaintiff; (2) the defendant does not employ wrongful
means; (3) the action does not amount to an unlawful restraint of trade; and (4) the defendant’s
9
purpose is, at least in part, to advance its own interest.” Nobody in Particular Presents, Inc. v.
Clear Channel Communs.,Inc., 311 F. Supp.2d 1048, 1115 (D. Colo. 2004)(citing Amoco Oil v.
Ervin, supra, 908 P.2d at 501; Restatement (Second) of Torts § 768).
As an initial matter, I agree with Zimmer Spine that it appears that “[u]nder Colorado law,
the competitor’s privilege is not an element of plaintiff’s claim, but an affirmative defense that
must be asserted and proven by the defendant.” Beeler Properties LLC v. Lowe Enterprises
Residential Investors LLC, 2007 WL 1059034, 4 (D.Colo. April 5, 2007)(citing C.J.I. 24:6,
Interference With Contracts – Affirmative Defense - Privilege - When Existent , When Lost, Notes
on Use No. 5, which describes the competitor’s privilege as set forth in Restatement (Second) of
Torts §768 as an affirmative defense). However, dismissing a claim under Fed. R. Civ. P.
12(b)(6) on the basis of an affirmative defense is proper where that defense is clear from the face
of the complaint. Bullington v. United Air Lines, Inc., 186 F.3d 1301, 1310 n .3 (10th Cir. 1999)
(“Rule 12(b)(6) is a proper vehicle for dismissing a complaint that, on its face, indicates the
existence of an affirmative defense such as noncompliance with the limitations period”),
abrogated on other grounds by National R.R. Passenger Corp. v. Morgan, 536 U.S. 101, 122
S.Ct. 2061, 153 L.Ed.2d 106 (2002); see also 5A Charles Wright & Arthur Miller, Federal
Practice and Procedure: Civil 2d §1357 at 348-49 (1990).
Because Zimmer Spine avers in its amended complaint that Defendants are its
competitors, and they do not make allegations that Defendants employed “wrongful means,”
Defendants assert that dismissal is proper as the competitor’s privilege is clearly applicable from
the face of the complaint. In response, Zimmer Spine does not contest that its position is that
Defendants are competitors. [¶ 6] However, it contends that it has properly alleged that
10
Defendants employed wrongful means in its interference that, in turn, makes the competitor’s
privilege inapplicable.
Comment e of §768 of the Restatement provides that:
Means of inducement. If the actor employs wrongful means, he is not justified
under the rule stated in this Section. The predatory means discussed in § 767,
Comment c, physical violence, fraud, civil suits and criminal prosecutions, are all
wrongful in the situation covered by this Section.
See also Amoco Oil v. Ervin, supra, 908 P.2d at 502. Defendants argue that Zimmer Spine had
not alleged that they employed wrongful means in that the amended complaint does not assert
factual allegations of “physical violence, fraud, civil suits and criminal prosecutions.” Zimmer
Spine, in response, argues that although it did not allege the means specified in Comment e, it did
allege wrongful means in the form of intentional interference with the sale agreement and
misappropriation of trade secrets.
As an initial matter, to the extent Defendants are arguing that “wrongful means” are
limited to the those specifically listed in Comment e of Restatement §768 – “physical violence,
fraud, civil suits and criminal prosecutions” – I disagree with such a narrow reading. The
Restatement itself does not provide limiting language and, moreover, Colorado case law does not
supports a reading that such acts constitute the only types of wrongful means. In Harris Group,
Inc. v. Robinson, 209 P.3d 1188, 1199 (Colo. App. 2009), a division of the Colorado Court of
Appeals upheld a jury instruction that clearly indicated that “physical violence, threats of criminal
prosecution, or threats of civil suit” served merely as examples, and were thus not the only
wrongful means at issue. The Court held that the torts of conversion and breach of fiduciary duty
constituted wrongful means of inducement as they were: independently actionable; capable of
forming the basis of liability for the actor; or wrongful by reason of a recognized rule of common
11
law or deceit or misrepresentation. Id. at 1200 (quoting Amoco Oil v. Ervin, supra, 908 P.2d at
502 n. 6; DP-Tek, Inc. v. AT & T Global Information Solutions Co., 100 F.3d 828, 833-35 (10th
Cir. 1996)).
Zimmer Spine argues that it has alleged independently actionable conduct of wrongful
means – first, that Defendants improperly interfered with Pro Medical/Wainright’s performance
of its obligations under the sales agreement and, in addition, that Defendants misappropriated
Zimmer Spine’s trade secrets. Specifically, the amended complaint alleges that Defendants
“employed wrongful means to cause the Pro Medical sales personnel to terminate their actual or
prospective relationships with Zimmer Spine . . . including but not limited to [Defendant’s]
intentional interference with Pro Medical’s and Wainright’s performance under the [sales]
agreement causing them to breach the agreement and [Defendants’] misappropriation of Zimmer
Spine’s trade secrets.” [¶ ¶ 101, 111]
In response, Defendants assert that the conduct alleged does not make up “the means” by
which Defendants tortiously interfered with the Zimmer Spine’s prospective relationship with the
sales personnel, but rather “merely facilitated” that interference. As such, the alleged conduct
does not constitute “wrongful means” as set forth in Restatement §768(1). In making this
argument, Defendants rely on Powell Products, Inc. v. Marks, 948 F.Supp.1469, 1479 (D. Colo.
1996), which ruled on summary judgment that even if the defendant created a product via
“wrongful means” – namely, improper use of trade secrets – it did not engage in wrongful means
constituting inducement in the context of an interference with a business relationship claim.
I agree with Defendants that the “wrongful means” alleged here were not directly related
to Defendant’s alleged interference with the prospective relationship between Zimmer Spine and
12
the sales personnel. Rather, as in Powell Products, Inc. v. Marks, supra, Defendants alleged
actions in inducing Pro Medical/Wainright to improperly breach its obligations sales agreement,
and in misappropriating Zimmer Spine’s trade secrets, constituted the facilitation of the
interference with the prospective relationship, not the means by which it was accomplished. I
conclude that Zimmer Spine’s allegations do not constitute “wrongful means” sufficient to
overcome application of the competitor’s privilege to dismiss the claim of intentional interference
based on the face of the amended complaint. I note that in so finding, I do not reach Defendant’s
argument that to the extent Zimmer Spine relied on the alleged misappropriation of trade secrets
as the “wrongful means,” such claim is preempted as duplicative of Zimmer Spine’s claims under
the Colorado Uniform Trade Secrets Act. See C.R.S §7-74-108.
Therefore, I conclude that Zimmer Spine’s claims of interference with its business
relationship with the sales personnel at Pro Medical who were selling Zimmer Spine’s products,
against both Defendants and against Biomet alone, must be dismissed for failure to state a claim
on the grounds that amended complaint fails to allege sufficient facts to support either an
established or prospective business relationship between Zimmer Spine and the sales personnel,
including Veri. Additionally, even if a prospective relationship was adequately alleged, the
amended complaint on its face fails to set forth allegations of “wrongful means” to support a
claim of interfering with that relationship sufficient to overcome application of the competitor’s
privilege. Therefore, Counts II and III of Zimmer Spine’s amended complaint are dismissed
pursuant to Fed. R. Civ. P. 12(b)(6).
13
IV. Violation[s] of Colorado Uniform Trade Secrets Act [Count V]
Defendants next contend that the misappropriation claims alleged against them by Zimmer
Spine fails to state a claim under Fed. R. Civ. P. 12(b)(6). Zimmer Spine alleges that Defendants
misappropriated trade secrets in violation of the Colorado Uniform Trade Secrets Act, §§ 7-74101-110, Colo. Rev. Stat. (“UTSA”). Zimmer Spine contends that it has alleged misappropriation
pursuant to both § 7-74-102(2)(a) (defining misappropriation as the “[a]cquisition of a trade
secret of another by a person who knows or has reason to know that the trade secret was acquired
by improper means”) and § 7-74-102(2)(b)(I)(defining misappropriation as the “[disclosure or use
of a trade secret of another without express or implied consent by a person who. . . [u]sed
improper means to acquire knowledge of the trade secret”).
Specifically, Zimmer Spine alleges that Defendants improperly acquired its trade secrets
from Pro Medical/Wainright “while knowing or having reason to know that the trade secrets were
acquired by improper means through breach or inducement of a breach of a duty to maintain
secrecy” – in violation of §7-74-102(2)(a). [¶ 28] In support of this claim, Zimmer Spine asserts
that Pro Medical/Wainright breached Section 24 of the sales agreement – which obligated them to
not reveal any of Zimmer Spine’s “Confidential Information” – “by revealing, reporting,
disclosing, divulging, communicating, or using, for the benefit of themselves and [Defendants]”
various types of Zimmer Spine information. [¶ 125] As an example, Zimmer Spine alleges that
Defendants “used confidential organizational information from Zimmer Spine to make
employment offers to and solicit Pro Medical’s Zimmer Spine sales personnel.” [¶ 125] It also
alleges that, upon information and belief, “Wainright is using Zimmer Spine’s confidential
customer information to distribute Biomet Spine products in Pro Medical and Wainright’s former
14
territory.” [¶ 125] The amended complaint also alleges that Defendants have improperly used
Zimmer Spine’s trade secrets “by soliciting and continuing to solicit Pro Medical’s . . . sales
personnel and . . . customers” for their own benefit – in violation of §7-74-102(2)(b)(1). [¶ 130]
In this motion, Defendants first maintain that Zimmer Spine does not (and cannot) claim
that Defendants themselves misappropriated the information, but rather that Wainright, a nonparty, allegedly revealed, disclosed, or used the trade secret information in purported breach of
his contractual obligations with Zimmer Spine. Defendants assert that the only information the
amended complaint directly alleges was improperly obtained and/or used by them is “confidential
organizational information” – i.e. “personnel and salary data” – which Zimmer Spine avers was
acquired and used by Defendants “to make employment offers to and solicit” the sales personnel.
[¶ 125] Defendants argue that such information does not constitute a trade secret because: 1)
personnel and salary data relating to Wainright’s sales representatives cannot constitute Zimmer
Spine’s trade secrets, especially when Zimmer Spine expressly disclaimed control or
responsibility for the “hiring and discharging” of the sales personnel in Section 10 of the sales
agreement; and 2) personnel and salary data for the sales representative does not constitute a trade
secret under the Colorado UTSA. See Restatement (First) of Torts § 757 Cmt. b (providing that a
trade secret “is not simply information as to single or ephemeral events in the conduct of the
business, as, for example, the amount or other terms of a secret bid for a contract or the salary of
certain employees”).
Zimmer Spine does not directly challenge Defendants’ assertion that the
personnel/organizational information at issue does not constitute a trade secret. Instead, Zimmer
Spine argues that its amended complaint asserts numerous other trade secrets Defendants
15
improperly acquired and/or used. Zimmer Spine refers me to the allegation in its complaint that
Pro Medical/Wainright revealed the following types of Zimmer Spine information to Defendants:
“marketing, sales, and advertising information, including lists of actual or potential customers,
customers preference data, and confidential customer information including identification of
purchasing personnel, account status, need and ability to pay; organizational information,
including personnel and salary data; financial information, including product costs and pricing
policies; technical information, including product specifications, designs, techniques, and new
products; and other confidential data of Zimmer Spine.” [¶ 125] Zimmer Spine further argues
that the amended complaint alleges that Defendants both acquired and used those trade secrets,
while knowing or having reason to know that the trade secrets were acquired by improper means
and without Zimmer Spine’s express or implied consent. [¶¶ 129 & 130]
While I agree with Defendants that these generalized allegations offer “little by way of
substance,” I find that the amended complaint, when viewed in the whole, adequately alleges that
Defendants have acquired Zimmer Spine’s trade secrets (such as marketing and sales information,
customer lists and data, financial information, and technical information) when they knew or had
reason to know that the information was acquired by improper means (breach or inducement of a
breach of a duty to maintain secrecy) – in violation of § 7-74-102(2)(a) – and/or
they used this trade secret information, without express or implied consent, obtained by improper
means – in violation of § 7-74-102(2)(b)(I). I conclude that the factual allegations and related
inferences alleged are sufficient to raise a plausible claim that Defendants improperly used or
acquired Zimmer Spine’s trade secrets. In so doing, I find that the general information Zimmer
Spine claims was improperly acquired and/or used is sufficiently set forth in the amended
16
complaint to raise a right to relief above the speculative level precluding dismissal of Count V of
Zimmer Spine’s amended complaint.
V. Unjust Enrichment [Count VI]
Finally, Defendants contend that Zimmer Spine has failed to state a claim against them for
unjust enrichment. To state a claim for unjust enrichment under Colorado law, a plaintiff must
allege that (1) at their expense, (2) defendants received a benefit, (3) under circumstances that
would make it unjust for them not to make restitution. Van Zanen v. Qwest Wireless, LLC, 550 F.
Supp. 2d 1261, 1266 (D. Colo. 2007)(citing DCB Constr. Co. v. Central City Dev. Co., 965 P.2d
115, 119-20 (Colo. 1998)). Zimmer Spine asserts that Defendants have been unjustly enriched by
their actions.
The amended complaint alleges that, upon Zimmer Spine’s information and belief,
Defendants “have reaped financial benefits at Zimmer Spine’s expense as a result of their
unlawful conduct described herein, including but not limited to conspiring to cause Pro Medical
and Wainright to breach their obligations under the [sales] agreement, interfering with the
business relationships between Zimmer Spine and the Pro Medical sales personnel, and
misappropriating Zimmer Spine’s trade secrets.” [¶ 134] The complaint next asserts that
“[p]ermitting [Defendants] to profit from such unlawful conduct would be unjust and inequitable”
and, accordingly, Defendants “should be ordered to disgorge any monies accruing to them as a
result of their unlawful conduct.” [ ¶¶ 135 & 136]
Defendants argue that this claim should be dismissed for failure to state a claim in that it
“makes only the barest formulaic recitation of the elements of an unjust enrichment claim.”
Specifically, they assert that the amended complaint fails to identify any benefit Defendants
17
received, or explain how this unidentified benefit came at Zimmer Spines’s expense. In response,
Zimmer Spine argues that its unjust enrichment claim “incorporates all of the allegations in the
previous paragraphs.” [¶ 133] Those allegation include that Defendants interfered with
Wainright/Pro Medical’s contractual obligations to Zimmer Spine – in that Wainright signed an
agreement with Biomet Spine and has begun to distribute Biomet products in parts of his former
Zimmer Spine territory – and that Wainright began his career with Biomet Spine with the benefit
of competitively sensitive and confidential Zimmer Spine information. [¶¶ 20, 56 & 80] In
addition to losing the benefits of its relationship with Pro Medical, the amended complaint also
asserts that Zimmer Spine incurred significant expenses to preserve its presence in the relevant
territory and to maintain its relationships with Pro Medical’s sales personnel and their customers.
[¶¶ 63-66]
Although the amended complaint is again sparse in specific factual allegations in support
of its claim for unjust enrichment, I conclude that it is sufficient – when the allegations are
viewed as true and in favor of Zimmer Spine – to allege a plausible claim for relief. Thus, I
conclude that Zimmer Spine has adequately pled a cognizable unjust enrichment claim precluding
dismissal of Count VI of its amended complaint.
VI. Conclusion
ACCORDINGLY, I GRANT IN PART and DENY IN PART Defendants’ Motion to
Dismiss, in that: (1) I GRANT the motion seeking dismissal for failure to state a claim of
Plaintiff’s claims against Defendants for Intentional Interference With Business Relationships
and, as such, I DISMISS Counts II & II of the Amended Complaint [Doc #10] pursuant to Fed. R.
Civ. P. 12(b)(6); and (2) I DENY the remaining relief requested. [Doc # 13]
18
In addition, based on the foregoing ruling, I DENY AS MOOT Defendants’ Motion to
Dismiss, filed on February 14, 2011, seeking dismissal of Plaintiff’s previously-filed Complaint.
[Doc # 7]
Dated: September
14 , 2011, in Denver, Colorado.
BY THE COURT:
s/Lewis T. Babcock
LEWIS T. BABCOCK, JUDGE
19
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?