DT Consultants, LLC v. Howmedica Osteonics Corp. et al
Filing
160
MEMORANDUM OPINION. Signed by Judge George Levi Russell, III on 9/14/2020. (krs, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
DT CONSULTANTS, LLC,
:
Plaintiff,
:
v.
:
HOWMEDICA OSTEONICS CORP.,
et al.,
Civil Action No. GLR-17-1697
:
:
Defendants.
MEMORANDUM OPINION
THIS MATTER is before the Court on Defendant Howmedica Osteonics Corp.’s
(“Howmedica”) Motion for Summary Judgment (ECF No. 131) and Plaintiff DT
Consultants, LLC’s (“DT”) Cross-Motion for Summary Judgment (ECF No. 141).1 The
Motions are ripe for disposition, and no hearing is necessary. See Local Rule 105.6 (D.Md.
The full caption of DT’s Cross-Motion for Summary Judgment is “Motion to
Strike and Exclude Paragraphs 31 through 42 and 44 through 54 of the Expert Report and
Paragraphs 11 through 17 and 21 through 24 of the Supplemental Expert Report of Timothy
H. Hart; Cross-Motion for Summary Judgment; and Response in Opposition to
Defendant’s Motion for Summary Judgment.” (ECF No. 141). In its Motion to Strike, DT
seeks the exclusion of certain findings by Howmedica’s expert Timothy H. Hart that rebut
arguments asserted by R. Christopher Rosenthal, one of DT’s experts. Because the Court
does not rely on these paragraphs in finding that DT is not entitled to summary judgment,
the Court will deny DT’s Motion as moot.
Also pending are Howmedica’s Motion to Exclude Testimony and Reports of
Plaintiff DT Consultants, LLC’s Experts R. Christopher Rosenthal, Dr. Samuel Adams &
Dr. James Nunley (ECF No. 148) and Motion to Strike Untimely Sham Affidavit of DT’s
CEO David Reicher (ECF No. 156). Once again, because the Court does not rely on these
expert reports or the affidavit in declining to enter judgment in favor of Howmedica, the
Court will deny these Motions as moot.
1
2018). For the reasons outlined below, the Court will deny both Motions and request
additional briefing from the parties.
I.
BACKGROUND2
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, which permitted DT to sublicense an
orthopedic database developed by Duke and Dr. James Nunley, II, the Chief of Duke’s
Department of Orthopaedic Surgery (the “Database”). (Id. ¶¶ 7, 11; Def.’s Mot. Summ. J.
[“Def.’s Mot.”] Ex. 12 [“Sublicense”] at App. A, ECF No. 131-11). The Database contains
data from 471 patients who received total ankle replacement surgery. (Def.’s Mot. Ex. 9
[“Nunley Dep.”] at 23:2–21, ECF No. 131-9).
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”). (Compl. ¶ 8). The Sublicense granted SBI permission to use the
Database. (Id. ¶ 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
Unless otherwise noted, the facts outlined here are set forth in DT’s Complaint
(ECF No. 1). To the extent the Court discusses facts that DT does not allege in its
Complaint, they are uncontroverted and the Court views them in the light most favorable
to the non-moving party. The Court will address additional facts when discussing
applicable law.
2
2
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.). The Sublicense required SBI to pay the $36,000.00 Update Royalty in
four quarterly $9,000.00 installments (the “Quarterly Payments”) due on the first day of
April, July, October, and January. (Id.). SBI and DT agreed that the Quarterly Payment
amount would increase by five percent compounded annually beginning in 2017. (Id.).
In August 2014, Howmedica entered into a 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. (See Defs.’ CrossMot. & Opp’n Pl.’s Mot. Part. Summ. J. Ex. 1 [“Assignment Agreement”] ¶ 5, ECF No.
18-3). Howmedica then made Quarterly Payments on July 22, August 18, and November
16, 2015; February 23, July 11, and October 17, 2016; and January 19, 2017. (Pl.’s Reply
Supp. Mot. Part. Summ. J. Ex. B at 2–9 [“Sept. 19, 2017 Reicher Decl.”] ¶ 25, ECF No.
28-2).
“Update” is capitalized and defined in the Sublicense. The Court uses the term as
defined in the Sublicense, which provides that an “Update” is an “extension . . . of the
histories of earlier selected patients” or “a new statistical extraction . . . from the most
recent provider database that shall comprise all or part of the Database.”
(Sublicense § 1.3).
3
3
On December 28, 2016, DT received a termination notice from Howmedica.4 (Pl.’s
Mot. Part. Summ. J. Ex. 2 [“Termination Letter”] at 2, ECF No. 4-2). In the letter, titled
“Termination of Duke Database Sublicense Agreement,” Howmedica stated 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 Howmedica a response indicating that its attempt to terminate
the Sublicense was “wrongful,” “in breach of the Agreement,” and “of no force or effect.”
(Pl.’s Mot. Part. Summ. J. Ex. 3 [“Jan. 6, 2017 Letter”] at 2, ECF No. 4-3). DT also
demanded that Howmedica “comply with the terms and conditio ns of the Agreement for
its stated term and promptly retract its stated ‘Termination’ of the Agreement.” ( Id.). On
February 8, 2017, Howmedica responded, asserting that under Maryland law “contract[s]
with a perpetual term do[] not exist forever; rather, such a contract is interpreted as
contemplating performance for a reasonable time” and is “terminable at will by either
party.” (Pl.’s Mot. Part. Summ. J. Ex. 4 [“Feb. 8, 2017 Letter”] at 1, ECF No. 4-4).
Also on January 6, 2017, Dr. Nunley sent Howmedica a letter to “serve as the written
commitment” to update the Database in 2017. (Def.’s Mot. Ex. 31 [“Nunley Letter”] at 1,
ECF No. 131-15; see also Nunley Dep. at 114:18–116:8). Howmedica did not remit the
Quarterly Payment due on April 1, 2017. (Sept. 19, 2017 Reicher Decl. ¶ 34). Nevertheless,
4
The Court notes that the letter is on Defendant Stryker Orthopaedics letterhead.
Stryker Orthopaedics is Howmedica’s doing-business-as name. Upon finding that Stryker
Orthopaedics was not a party to the Sublicense and therefore could not be held liable for
any breach of the Sublicense, the Court entered judgment in favor of Stryker on July 13,
2018. (July 13, 2018 Mem. Op. at 11, ECF No. 38). As such, the Court uses Howmedica’s
name to avoid confusion.
4
on July 5, 2017, DT sent Howmedica the 2017 Second Quarter Database Update. (Pl.’s
Reply Supp. Mot. Part. Summ. J. Ex. B at 78 [“2017 Update”]). Howmedica attempted to
reject DT’s delivery of the Update on July 12, 2017. (Albu Decl. Ex. A at 5, ECF No. 351). On June 20, 2017, Howmedica provided DT with written correspondence reiterating
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.’ Cross-Mot. & Opp’n Pl.’s Mot. Part. Summ. J. Ex. 1 at 72–73 [“June
20, 2017 Letter”], ECF No. 18-3).
DT brought suit against Howmedica on June 21, 2017 for breach of contract (Count
I) and contractual indemnification (Count II). (Compl. ¶¶ 26–36). DT and Howmedica later
filed cross-motions for partial summary judgment on the issue of Howmedica’s liability
for breach of contract. (See ECF Nos. 4, 18, 28, 35). On July 13, 2018, the Court entered
summary judgment in favor of DT for Counts I and II, concluding that “Howmedica
materially breached the Sublicense when it terminated the Agreement in December 2016
and when it failed to remit the April 2017 Quarterly Payment.” (Jul y 13, 2018 Mem. Op.
at 17, ECF No. 38; see also July 13, 2018 Order at 1–2, ECF No. 39).
After a period of additional discovery, Howmedica filed its present Motion for
Summary Judgment on September 10, 2019. (ECF No. 131). On October 25, 2019, DT
filed an Opposition and Cross-Motion for Summary Judgment. (ECF No. 141). On January
7, 2020, Howmedica filed a combined Reply in support of its Motion for Summary
5
Judgment and Opposition to DT’s Cross-Motion. (ECF No. 144). DT filed a Reply in
support of its Cross-Motion on April 13, 2020. (ECF No. 154).
II.
A.
DISCUSSION
Standard of Review
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 a 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 sp eculation
6
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).
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 ligh t most
7
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
Because the Court has already entered judgment in favor of DT on the question of
Howmedica’s liability, (see July 13, 2018 Mem. Op. at 18), the only issue remaining for
the Court is the amount of damages, if any, that Howmedica owes for its breach of the
Sublicense.
Under Maryland law,5 the non-breaching party in a contract action may recover
damages for (1) “the losses proximately caused by the breach,” (2) “that were reasonably
foreseeable,” and (3) “that have been proven with reasonable certainty.” Hoang v. Hewitt
Ave. Assocs., LLC, 936 A.2d 915, 934 (Md.Ct.Spec.App. 2007) (citing Impala Platinum,
Ltd. v. Impala Sales, Inc., 389 A.2d 887, 907 (Md. 1978)). In this context, reasonable
certainty “means the likelihood of the damages being incurred as a consequence of the
breach, and their probable amount.” Id. at 935. “Losses that are speculative, hypothetical,
remote, or contingent either in eventuality or amount will not qualify as ‘reasonably
certain’” and therefore are not recoverable as contract damages. Id. (citing Stuart
5
The parties agree that Maryland law governs this case.
8
Kitchens, Inc. v. Stevens, 234 A.2d 749, 751–52 (Md. 1967); Kleban v. Eghrari-Sabet,
920 A.2d 606, 628 (Md.Ct.Spec.App. 2007)). “On a claim for breach of contract, the
plaintiff . . . asserting the claim for damages bears the burden of proving all elements of
the cause of action, including plaintiff’s own performance of all material contractual
obligations.” Collins/Snoops Assocs., Inc. v. CJF, LLC, 988 A.2d 49, 57
(Md.Ct.Spec.App. 2010) (citing Johnson & Higgins v. Simpson, 163 A. 832, 834 (Md.
1933)).
DT seeks damages for lost profits resulting from Howmedica’s breach. ( See Mem.
Supp. Pl.’s Cross-Mot. & Opp’n at 24, ECF No. 141-2). “When lost profits are claimed
for lost income from business operations that would have been made but for the breach,
the claim is for ‘consequential’ or ‘special’ damages.” CR-RSC Tower I, LLC v. RSC
Tower I, LLC, 56 A.3d 170, 182 (Md. 2012) (citation omitted). In such cases, the nonbreaching party may recover losses that “may reasonably be supposed to have been in the
contemplation of both parties at the time of making of the contract.” Id. (quoting Burson
v. Simard, 35 A.3d 1154, 1159 (Md. 2012)). Put differently, lost profits are not
recoverable unless they are “reasonably supposed to have been within the contemplation
of the parties, when the contract was made, as the probable result of a breach.” Meineke
Car Care Ctrs., Inc. v. RLB Holdings, LLC, 423 F.App’x 274, 287 (4th Cir. 2011).
Howmedica contends it is entitled to summary judgment because the Sublicense
lasts “in perpetuity” and perpetual damages cannot be proven with reasonable certainty;
DT has not adequately proven its costs or losses resulting from Howmedica’s breach; or,
9
alternatively, Howmedica owes no damages because it already paid DT everything that
was due under the terms of the Sublicense. For its part, DT contends that the clear and
unambiguous terms of the Sublicense compel a damages award of $8,674,811.00 in
unpaid Update Royalties. The Court will begin by addressing DT’s Cross-Motion for
Summary Judgment.
1.
DT’s Cross-Motion
DT asserts it is entitled to $8,674,811.00 in unpaid Update Royalties and interest
because Updates to the Database would have continued for forty-seven years if
Howmedica had not breached the Sublicense. In support of this position, DT points to
testimony that Dr. Samuel Adams, an orthopedic surgeon at Duke, would maintain the
Database after Dr. Nunley’s retirement, and that Duke would “unquestionably” provide
Updates to the Database as long as the patients are alive. (Pl.’s Cross-Mot. & Opp’n Ex.
H [“Nunley Rep.”] ¶¶ 41–48, ECF No. 141-10; id. Ex. J [“Adams Rep.”] ¶¶ 15–20, ECF
No. 141-12). DT also cites the finding by its damages expert, J. Christopher Rosenthal,
that the average life expectancy of the four youngest participants in the Database is fortyseven years. (Id. Ex. F [“Rosenthal Rebuttal Rep.”] ¶¶ 29–30, ECF No. 141-8). At bottom,
the Court finds that this evidence is insufficient to enter summary judgment in favor of
DT.
First, the testimony of Drs. Nunley and Adams is too speculative to support an
award of forty-seven years of future Update Royalties because the Sublicense did not
guarantee Updates to the Database after 2016 and, in any event, the duty to provide
10
Updates terminated upon Howmedica’s breach of the Sublicense. The Sublicense states
that “Dr. Nunley covenants, promises and agrees . . . to provide Updates to the Database
each calendar year beginning calendar year 2012 to and including calendar year 2016.”
(Sublicense § 4.2 (emphasis added)). Elsewhere, the Sublicense contemplates Updates
after 2016—for instance, § 4.1 explains what the Update Royalties would be in 2017 and
2018 “in the event that” Howmedica received a written commitment from Dr. Nunley
those years—but does not impose any duty to provide them. Certainly nothing in the
Sublicense guarantees that Updates would continue past 2016, much less each year until
the death of the last remaining Database participant. And regardless of the assurances from
Drs. Nunley and Adams about future Updates, any duty to deliver Updates after 2016 was
discharged upon Howmedica’s material breach of the Sublicense .6 See Jay Dee/Mole Joint
Venture v. Mayor & City Council of Balt., 725 F.Supp.2d 513, 526 (D.Md. 2010) (noting
that a material breach “discharges the non-breaching party of its duty to perform”). Thus,
the testimony from Drs. Nunley and Adams that they would have provided Updates for
forty-seven years is merely hypothetical and cannot support an award of damages. See Big
Lots Stores, Inc. v. Giant of Md., LLC, No. CV DKC 2006-3249, 2008 WL 11367511, at
*3 (D.Md. July 14, 2008) (finding that testimony indicating plaintiff “would have renewed
6
This Court held that Howmedica materially breached the Sublicense when it failed
to remit the April 2017 Quarterly Payment. (July 13, 2018 Mem. Op. at 17; see also
Sublicense § 6.1.1 (“[A] material breach of this Agreement by [Howmedica] by not paying
when due and payable . . . any Update Royalty (or Quarterly Payment) shall not be deemed
to be curable by [Howmedica].”)).
11
the sublease three, ten, and twenty years in the future” if defendant had not terminated the
sublease was “mere conjecture” and too speculative to support an award of lost profit
damages).
Second, DT cannot prove its damages with reasonable certainty because the
condition precedent giving rise to Howmedica’s duty to pay Update Royalties has not
been satisfied. “Generally, when a condition precedent is unsatisfied, the corresponding
contractual duty of the party whose performance was conditioned on it does not arise.”
Chesapeake Bank of Md. v. Monro Muffler/Brake, Inc., 891 A.2d 384, 391–92
(Md.Ct.Spec.App. 2006) (internal quotation marks and citation omitted); see also Laurel
Race Course, Inc. v. Regal Constr. Co., 333 A.2d 319, 327 (Md. 1975) (“It is fundamental
that where a contractual duty is subject to a condition precedent, whether express or
implied, there is no duty of performance and there can be no breach by nonperformance
until the condition precedent is either performed or excused.”).
Under the terms of the Sublicense, Howmedica’s payment of Update Royalties is
contingent on two events: (1) a written commitment stating that Dr. Nunley or his
colleague would provide an Update in that calendar year; and (2) DT’s actual delivery of
the Update. (See Sublicense § 4.1). In other words, these events are conditions precedent
to Howmedica’s duty to pay the full Update Royalty for a given year. (See July 13, 2018
Mem. Op. at 15–16). On January 6, 2017, Dr. Nunley sent Howmedica a commitment to
provide an Update for calendar year 2017, and on July 5, 2017, DT sent Howmedica the
Update. However, Duke has not provided any Updates to Howmedica since 2017, nor has
12
Howmedica received a notice from Dr. Nunley or his colleagues promising any Updates
after 2017, much less for forty-seven years of future Updates.7 (See, e.g., Def.’s Mot. Ex.
8 [“Reicher Dep.”] at 118:12–17, ECF No. 131-8; Nunley Dep. at 116:6–8; Def.’s Mot.
Ex. 5 ¶ 27, ECF No. 131-5 (admitting “that Duke has not provided DT with any Updates
to the SBI database, as defined in the License, since 2017”) ). Because DT’s requested
damages are contingent on conditions precedent that have not been satisfied for any year
beyond 2017, DT’s requested damages are not reasonably certain and therefore not
recoverable as contract damages. See Hoang, 936 A.2d at 934.
Finally, the Court finds that the evidence DT presents here is not the type of
competent evidence required to prove damages with reasonable certainty in light of
Management Systems Associates, Inc. v. McDonnell Douglas Corp., 762 F.2d 1161 (4th
Cir. 1985).8 There, the United States Court of Appeals for the Fourth Circuit considered
7
On this point, it is worth noting that the language of the Sublicense dictates that,
at present, Howmedica could only be liable for Updates through 2020 at the very latest.
The Sublicense states that Howmedica must pay Update Royalties when it “receive[s] in
any calendar year . . . the written commitment or agreement by [Dr. Nunley or a qualified
colleague] to Update the Database during that calendar year” and “receive[s] during that
calendar year an Update of the Database.” (Sublicense § 4.1 (emphasis added)). In other
words, Howmedica must receive the commitment from Dr. Nunley during the year in
which the Update will be provided. Thus, as this Court reads it, Dr. Nunley could not
provide a written commitment to Howmedica in 2020 stating that he would provide
Updates in year 2021 and onward. For this reason, the argument that Howmedica owes
forty-seven years of future Update Royalties is simply untenable.
8
Although Management Systems involved a contract governed by North Carolina
law, the Court notes that North Carolina, like Maryland, requires damages to be proven
with “reasonable certainty” and not be based on “hypothetical or speculative forecasts of
losses.” Iron Steamer, Ltd. v. Trinity Rest., Inc., 431 S.E.2d 767, 770 (N.C.Ct.App. 1993).
13
how long a licensee was required to pay royalties under a software licensing agreement
that one party argued was “perpetual” and continued “for eternity.” Id. at 1169. Reasoning
that “it would be impossible to make . . . a calculation based on payments ‘for eternity,’”
the court looked to the construction of the agreement and past dealings between the parties
to determine a “reasonable” lease term. Id. at 1169–71.
DT has not presented any evidence of dealings between the parties suggesting that,
at the time they entered into the Sublicense, they intended for Updates to continue for the
lifetime of the Database participants. Although DT CEO David Reicher recalled that
Anthony Viscogliosi, then the executive chairman of SBI, “wanted to follow these patients
indefinitely for their life,” Reicher admits there are no contemporaneous documents
supporting that position. (Pl.’s Resp. Opp’n Def.’s Reply Supp. Mot. Summ. J. & Opp’n
Pl.’s Cross-Mot. Summ. J. [“Pl.’s Reply”] Ex. G [“Reicher Dep.”] at 83:17–84:1, ECF No.
154-8). To the contrary, Viscogliosi’s notes from the time of negotiations indicate he
wanted Dr. Nunley to update the Database through 2016 because that would guarantee
him a “seven- to ten-year period [of data] for a large number of patients.” (See Def.’s Mot.
Ex. 6 [“Viscogliosi Dep.”] at 66:8–67:25, ECF No. 131-6). Likewise, Thomas Loring, who
served as the head of SBI’s Worldwide Ankle Business unit from 2010 to 2014, averred
that SBI intended to use the Database to track the patients thro ugh 2016, the ten-year point
from the earliest date of surgery, not to follow patients for the rest of their lives. (Def.’s
Reply Supp. Mot. Summ. J. & Opp’n Pl.’s Cross-Mot. [“Def.’s Reply”] Ex. 62 [“Loring
Decl.”] ¶¶ 6, 8, 12–13, ECF No. 144-4; see Def.’s Reply Ex. 63 [“Loring Dep.”] at 64:8–
14
64:14, ECF No. 144-5). At bottom, there is insufficient evidence in the record to find that
the parties contemplated forty-seven years of Updates at the time they entered into the
Sublicense. Without such evidence, DT’s requested damages are hypothetical and cannot
be proven with reasonable certainty.
Relatedly, the assumptions underlying Rosenthal’s calculation of the damages
period lack any connection to the text of the Sublicense or the dealings between the pa rties;
instead, Rosenthal’s determination of the damages period is based only on the testimony
of Drs. Nunley and Adams. In addition, Rosenthal does not offer any scientific or statistical
explanation for selecting the average life expectancy of the four y oungest participants—
as opposed to the life expectancy of the ten youngest participants, or median life
expectancy, or average life expectancy of all the participants —to determine the length of
the damages period. Rather, Rosenthal testified that he narrowed in on the youngest
patients for his calculation because, quite obviously, “[t]hey had the longest expected life.”
(Pl.’s Reply Ex. B [“Rosenthal Dep.”] at 90:5, ECF No. 154 -3). By his own admission,
Rosenthal selected these individuals based on the instruction by DT’s counsel—not
because of any independent analysis or reasoning. (See Def.’s Mot. Ex. 10 [“Rosenthal
Dep.”] at 87:2–19, ECF No. 131-10; id. Ex. 32 [“Rosenthal Expert Rep.”] ¶ 28, ECF No.
131-16).9 In all, expert testimony that select participants in the database would live for
Thought not fatal to Rosenthal’s expert determination , it is worth noting that
Howmedica’s expert opined that, if the damages period had to be based on patient lifespan,
a more appropriate damages period would “be measured by the average life expectancy of
9
15
another forty-seven years—without any evidence that the parties contemplated this
timeframe at the time they entered into the Sublicense—falls short of the type of evidence
required for DT to prove its damages with reasonable certainty.
In sum, DT’s request for forty-seven years of unpaid Update Royalties is
inconsistent with the Court’s reading of the Sublicense and is not supported by any
contemporaneous evidence of an understanding between the parties. The evidence that DT
does offer is speculative, hypothetical, and untethered from the terms of the Sublicense
itself. As such, DT cannot meet its burden of proving $8,674,811.00 in lost profits with
reasonable certainty, and DT’s Cross-Motion will be denied.
2.
Howmedica’s Motion
Howmedica first argues that it is entitled to summary judgment because the
Sublicense lasts “in perpetuity” and perpetual damages cannot be proven with reasonable
certainty. While this may be true, DT does not seek “perpetual” damages here; rather , DT
requests damages for a term of forty-seven years—a term that is untenable for the reasons
stated above. As such, this argument is insufficient to enter judgment in Howmed ica’s
favor.
Next, Howmedica argues that it is entitled to judgment as a matter of law because
DT failed to introduce evidence of the costs and losses it avoided as a result of
Howmedica’s breach. Specifically, Howmedica asserts that DT blocked discovery relating
participants 61 and over,” who make up 87.7% of the database. (Pl.’s Cross -Mot. & Opp’n
Ex. M [“Hart Expert Rep.”] ¶¶ 46–48, ECF No. 141-15).
16
to DT’s royalty payments to Duke, which Howmedica contends are required to calculate
the offset to damages with reasonable certainty. The Court is not persuaded. As DT points
out, Judge Copperthite previously ruled, and this Court affirmed, that DT’s royalty
payments to Duke are not relevant to the calculation of damages because they “do[] not
serve as any reduction of damages owed by [Howmedica].” (Dec. 18, 2018 Order at 2,
ECF No. 85; see Apr. 18, 2019 Order at 3, ECF No. 116). As such, the Court declines to
enter judgment for Howmedica on this ground.
Finally, Howmedica contends that the plain language of the Sublicense compels a
finding of no damages, warranting summary judgment in its favor. This argument also
fails. Although DT has not satisfied the burden of proving its lost profit damages with
reasonable certainty, the Court cannot hold as a matter of law that Howmedica owes no
damages for its breach of the Sublicense. Instead, the Court finds that DT is entitled to
damages equal to the unpaid Update Royalties for 2017.
As discussed above, Dr. Nunley sent Howmedica a commitment to provide an
Update for calendar year 2017 on January 6, 2017. Howmedica failed to remit the
Quarterly Payment due on April 1, 2017, which constituted a material and incurable breach
of the Sublicense. (See July 13, 2018 Mem. Op. at 16–17; see also Sublicense §§ 4.3,
6.1.1).10 DT later delivered the Update to Howmedica on July 5, 2017 . Pursuant to the
10
The Court previously found that Howmedica also breached the Sublicense when
it sent DT a termination notice in December 2016. (July 13, 2018 Mem. Op. at 14). Under
the terms of the Sublicense, however, this breach was curable and therefore did not prevent
DT from committing to provide an Update to Howmedica in 2017. (See Sublicense §
17
unambiguous language of the Sublicense, these events triggered Howmedica’s duty to pay
$37,800.00 in Update Royalties in the form of four Quarterly Payments due on the first
day of April, July, and October 2017, and January 2018. Howmedica did not make any of
these Quarterly Payments. As such, the Court finds that DT is entitled to damages equal
to the unpaid Update Royalties for 2017, plus interest and other fees as provided by the
terms of the Sublicense. Accordingly, Howmedica’s Motion for Summary Judgment will
be denied. Additionally, the Court will direct DT to submit a Motion for Award of
Damages consistent with the foregoing analysis within ten (10) days of the date of this
Opinion, and permit Howmedica to submit an Opposition to DT’s calculation of damages
within seven (7) days thereafter.11
III.
CONCLUSION
For the foregoing reasons, the Court will deny Howmedica’s Motion for Summary
Judgment (ECF No. 131); deny DT’s Cross-Motion for Summary Judgment (ECF No.
141); and deny as moot DT’s Motion to Strike and Exclude Paragraphs 31 through 42 and
44 through 54 of the Expert Report and Paragraphs 11 through 17 and 21 through 24 of the
Supplemental Expert Report of Timothy H. Hart (ECF No. 141); Howmedica’s Motion to
Exclude Testimony and Reports of Plaintiff DT Consultants, LLC’s Experts R. Christopher
6.1.1). As such, the Court finds that the operative material breach occurred when
Howmedica failed to remit the first 2017 Quarterly Payment.
11 Although the Court notes Howmedica’s exception to the finding of liability and
damages, its Opposition must be limited to DT’s calculation of the specific amount
awarded pursuant to this Opinion.
18
Rosenthal, Dr. Samuel Adams & Dr. James Nunley (ECF No. 148); and Howmedica’s
Motion to Strike Untimely Sham Affidavit (ECF No. 156). A separate Order follows.
Entered this 14th day of September, 2020.
/s/
George L. Russell, III
United States District Judge
19
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