Alm et al v. DJO, LLC et al
Filing
74
MEMORANDUM ORDER AND OPINION granting in part and denying in part 65 Motion to Dismiss for Lack of Jurisdiction. (See Memorandum Opinion and Order for details.) (Written Opinion.) Signed by Judge Donovan W. Frank on 03/08/2013. (rlb)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Jaclyn A. Alm,
Civil No. 12-49 (DWF/LIB)
Plaintiff,
v.
MEMORANDUM
OPINION AND ORDER
DJO, LLC; DJO Incorporated,
n/k/a DJO Global, Incorporated;
McKinley Medical, LLC; Moog, Inc.;
Curlin Medical, Inc.; The Broe
Companies, Inc.; Pat Broe; and
DJO Global, Inc.,
Defendants.
Elisha N. Hawk, Esq., Janet, Jenner & Suggs, LLC; and Yvonne M. Flaherty, Esq., and
Caia V. Johnson, Esq., Lockridge Grindal Nauen PLLP, counsel for Plaintiff.
Bradley J. Lindeman, Esq., Elizabeth Snyder Poeschl, Esq., and Jon R. Russell, Esq.,
Meagher & Geer, PLLP, counsel for DJO Defendants.
Byeongsook Seo, Esq., Gordon & Rees LLP; and Jonathan P. Norrie, Esq., Bassford
Remele, PA, counsel for McKinley Medical LLC and Broe Defendants.
Corey Lee Gordon, Esq., Brendan M. Kenny, Esq., Emily A. Babcock, Esq., and Jerry W.
Blackwell, Esq., Blackwell Burke PA, counsel for Moog Inc. and Curlin Medical, Inc.
INTRODUCTION
This matter is before the Court on Broe Defendants’ Motion to Dismiss Pursuant
to Fed. R. Civ. P. 12(b)(1), or, in the Alternative, Motion to Stay (Doc. No. 65). For the
reasons set forth below, the Court grants in part and denies in part Broe Defendants’
motion.
BACKGROUND
Plaintiff Jaclyn Alm (“Plaintiff”) alleges, in a Complaint filed on January 6, 2012,
that she was injured by a defective pain pump, inserted into her left shoulder joint
following arthroscopic surgery in November of 2006. (Doc. No. 1, Compl. ¶ 32.)
Plaintiff asserts claims against all Defendants 1 sounding in negligence, fraud, strict
products liability, and breach of express and implied warranties. (Id. ¶¶ 80-171.)
On September 18, 2012, DJO, LLC filed an Amended Answer to Plaintiff’s
Complaint and Cross-Claim against Moog, Curlin, and the Broe Defendants. (Doc.
No. 47.) DJO asserts the following two counts against Moog, Curlin, and the Broe
Defendants: (1) common law indemnity; and (2) contribution. (Id. ¶¶ 220-26.) DJO’s
cross-claims arise out of a Distribution Agreement between McKinley and DJO, effective
October 1, 2003, pursuant to which DJO agreed to distribute pain pumps manufactured
by McKinley. (Id. ¶ 209.) The Distribution Agreement governed the parties’ relationship
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Defendants DJO, LLC and DJO, Incorporated, now known as DJO Global,
Incorporated (collectively, “DJO”) engage in the marketing, distributing, promoting, and
selling of infusion pain pumps. (Compl. ¶ 19.) Defendant McKinley Medical, LLC
(“McKinley”), Defendant Curlin Medical, Inc. (“Curlin”), and Defendant Moog, Inc.
(“Moog”) engage in the testing, manufacturing, labeling, marketing, distributing,
promoting, and selling of pain pumps. (Id. ¶¶ 21-23.) Curlin acquired McKinley’s pain
pump business in August of 2006. (Id. ¶ 23.) Also in 2006, Moog purchased McKinley
and Curlin. (See id. ¶ 22.) Defendant The Broe Companies, Inc. (managed by Pat Broe)
was the parent company of McKinley, and no longer exists as an active business. (Id.
¶ 29.) The Court refers to McKinley, The Broe Companies, Inc., and Pat Broe,
collectively, as the “Broe Defendants.”
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with respect to the sale of specific pain pump products. (Doc. No. 68, Ex. A
(“Distribution Agreement”).) The Distribution Agreement provides, in part:
Each of the parties hereto shall be responsible for its own acts or omissions
or alleged acts or omissions (and in the case of DJO, for the acts or
omissions of its SubDistributors) and each of the parties shall protect,
indemnify, defend and hold harmless the other party and any affiliate or the
other party from and against any and all claims, losses, demands and
liabilities, including attorneys’ fees and court costs, which may arise
therefrom. However, in no event shall McKinley be liable to DJO or any
third party for any lost profits or any other incidental or consequential
damages of any kind.
(Id. § 13.02.)
The Distribution Agreement further provides:
In the event of any dispute, claim or controversy (a “Claim”) arising out of
or relating to this Agreement or the purchase of Products hereunder, the
parties agree to make a good faith attempt to negotiate an amicable
resolution to any and all such Claims. Any controversy or claim arising out
of or relating to this Agreement, or the breach thereof, not resolved by the
parties within thirty (30) days after delivery of written notice thereof from a
party to the other parties involved with such dispute, shall be settled by
arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §1, et seq., in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association . . . .
The decision of the arbitrator(s) shall be final and binding upon the parties
and judgment upon the award may be entered in any court having
jurisdiction thereof. The arbitration shall take place in Denver, Colorado
and the expenses of the arbitrator(s) shall be split equally between the
parties. DJO acknowledges that this Agreement concerning arbitration and
in particular the place of arbitration is an essential part of this Agreement
and upon which McKinley has substantially relied in entering this
Agreement . . . .
(Id. § 15.02.)
In August of 2006, Moog purchased McKinley and Curlin. (Doc. No. 47 ¶ 211.)
DJO continued its distribution arrangement with McKinley’s successor corporation
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Curlin, and allegedly entered into a similar distribution agreement with Curlin and Moog
in March 2007. (Id. ¶ 212.) DJO alleges that, pursuant to the distribution agreements,
Moog, Curlin, and McKinley agreed to manufacture pain pumps free from defects and fit
for use. (Id. ¶ 214.) DJO asserts that the distribution agreement between DJO, Moog,
and Curlin provides that “Curlin shall indemnify and defend DJO from any and all claims
which may arise from the sale of the pain pumps manufactured by Curlin.” (Id. ¶ 212.)
DJO further alleges that, as the manufacturers of the pain pump used in Plaintiff’s
surgery, Moog, Curlin, and McKinley are independently liable to Plaintiff for her injuries
and damages if the pain pump, in fact, caused her injuries. (Id. ¶ 215.)
DISCUSSION
I.
Legal Standard
Broe Defendants bring this motion pursuant to the Federal Arbitration Act
(“FAA”). The FAA provides that written agreements to arbitrate “shall be valid,
irrevocable, and enforceable.” 9 U.S.C. § 2. Broe Defendants asks that the Court dismiss
or stay the proceedings because the present dispute is governed by a written arbitration
agreement. In determining whether to compel arbitration, the Court must determine:
(1) whether a valid agreement to arbitrate exists between the parties; and (2) whether the
specific dispute is within the scope of that agreement. Pro Tech Indus., Inc. v. URS
Corp., 377 F.3d 868, 871 (8th Cir. 2004). There is a strong presumption in favor of
arbitration and any doubts concerning arbitration rights should be resolved in favor of
arbitration. Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25
(1983).
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II.
Broe Defendants’ Motion
The Court first addresses the issue of whether a valid agreement to arbitrate exists.
There appears to be no dispute that a valid arbitration agreement exists pursuant to the
Distribution Agreement executed by DJO and McKinley. 2 (Distribution Agreement
§ 15.02.) The Court concludes that DJO and McKinley entered into a valid agreement to
arbitrate and thereby agreed to submit to arbitration “[a]ny controversy or claim arising
out of or relating to” the Distribution Agreement.
The Court next considers whether the present dispute is within the scope of the
arbitration agreement. DJO maintains that, because it seeks common law contribution
and indemnity in this case rather than contractual indemnification pursuant to the
Distribution Agreement, the arbitration clause within the Distribution Agreement does
not apply. It is clear to the Court, however, that the dispute here arises out of the
manufacture, distribution, and sale of pain pump products. (See generally Compl.)
In this case, Plaintiff’s claims against all Defendants stem from the manufacture,
distribution and sale of an allegedly defective pain pump product. In light of these
claims, DJO seeks indemnity and contribution from McKinley and McKinley’s parent
company, controlling shareholder, and successors in interest. (Doc. No. 47 ¶¶ 209-11.)
2
The Distribution Agreement, as executed by “DJ Orthopedics, LLC,” was entered
into by DJ Orthopedics, LLC as well as “its affiliates and subsidiaries,” collectively
known as “DJO,” and thereby bound all DJO entities to the terms of the Distribution
Agreement. (See Distribution Agreement at 1.)
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Now, McKinley, as a signatory to the agreement, along with Broe Companies, Inc.
and Pat Broe, as non-signatories to the Distribution Agreement, but rather as parent
company and controlling shareholder of McKinley, seek to enforce the arbitration clause
against DJO. (Doc. No. 72 at 2-3.) The Court finds that the dispute here arises out of
and relates directly to the contractual agreement between the signatories of the
Distribution Agreement to sell and distribute pain pump devices. See CD Partners, LLC
v. Grizzle, 424 F.3d 795, 800 (8th Cir. 2005). The Distribution Agreement itself contains
several provisions regarding warranties, product complaints, recalls, compliance with
law, and, of course, indemnification. (Distribution Agreement ¶¶ 10.01-13.02.) In
particular, McKinley warranted that products to be sold to DJO for distribution were
“free from defects” and were fit for “ordinary use.” (Id. ¶ 10.01.) Thus, the product
liability claims at issue in this lawsuit (even if the cross-claims are grounded in common
law as opposed to contractual indemnity) necessarily implicate other provisions of the
contract. Contra In re Wholesale Grocery Prods. Antitrust Litig., ---F.3d---, 2013 WL
514758 at *4-5 (8th Cir. Feb. 13, 2013) (noting that antitrust claims in that case did not
“involve violation of the terms of the contract” at issue and remanding on
successor-in-interest argument).
Accordingly, the Court concludes that DJO’s cross-claims “arise out of or relate
to” the Distribution Agreement and thus fall within the scope of the arbitration clause.
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The cross-claims are therefore subject to arbitration. As such, the Court compels
arbitration of DJO’s cross-claims. 3
ORDER
Based upon the foregoing, IT IS HEREBY ORDERED that:
1.
Broe Defendants’ Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(1),
or, in the Alternative, Motion to Stay (Doc. No. [65]) is GRANTED IN PART and
DENIED IN PART as follows:
a.
To the extent Broe Defendants seek to compel arbitration of
the cross-claims against them, the motion is GRANTED.
b.
To the extent Broe Defendants seek dismissal for lack of
subject matter jurisdiction, the motion is DENIED.
2.
DJO’s cross-claims against Broe Defendants are subject to arbitration.
3.
All Broe Defendants shall participate in the arbitration process.
4.
The cross-claims are STAYED pending the outcome of arbitration.
5.
The Court expressly retains jurisdiction over this case.
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Notably, DJO does not appear to oppose arbitration and a stay of the cross-claims
provided that each Broe Defendant be bound by the terms of the Distribution Agreement
and each Broe Defendant attend and participate in arbitration. (Doc. No. 71 at 2.) While
the Court orders the Broe Defendants to participate in arbitration, it declines to make an
affirmative ruling regarding specifically which Broe Defendant entities, other than
McKinley, are “bound” by the Distribution Agreement at this time.
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6.
This order shall have no effect on Plaintiff’s claims in this matter, which
shall proceed before this Court. 4
Dated: March 8, 2013
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
4
It appears from the record that Plaintiff has resolved its claims against McKinley
Medical, LLC, Pat Broe, and The Broe Companies, Inc., but that Plaintiff intends to
pursue its claims against DJO, LLC and DJO Global, Inc. (Doc. No. 54; see also Doc.
No. 17.) As of the date of this Order, however, no settlement agreement or dismissal
papers have been filed.
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