Inhalation Plastics, Inc. v. Medex Cardio-Pulmonary, Inc.
Filing
260
OPINION AND ORDER denying 254 motion to reopen discovery and for leave to filea motion for reconsideration of the Courts summary judgment ruling. Signed by Magistrate Judge Norah McCann King on 5/06/13. (rew)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
INHALATION PLASTICS, INC.,
Plaintiff,
vs.
Civil Action 2:07-CV-116
Judge Smith
Magistrate Judge King
MEDEX CARDIO-PULMONARY, INC.,
et al.,
Defendants.
OPINION AND ORDER
This matter is before the Court on plaintiff Inhalation Plastics,
Inc. (“Inhalation Plastics”) and counter defendant Walter Levine‘s
(collectively “IPI”) motion to reopen discovery and for leave to file
a motion for reconsideration of the Court’s summary judgment ruling.
IPI’s Motion, Doc. No. 254.
Defendants Medex Cardio-Pulmonary, Inc.
(“Medex CP”) and Smith Medical ASD (“Smiths”) oppose IPI’s Motion,
Doc. No. 257, and IPI has filed a reply, Doc. No. 259.
now ripe for consideration.
This matter is
For the reasons that follow, IPI’s Motion
is DENIED.
I.
Background
The Court has previously set forth the background of this case:
[Inhalation Plastics] manufactured and distributed medical
products
used
in
the
treatment
of
patients
having
respiratory and anesthesia needs.
At all relevant times,
Walter Levine owned and was the President of [Inhalation
Plastics], and David Levine was the Vice President of Sales
and Marketing and Corporate Secretary of [Inhalation
Plastics].
Medex CP, also a manufacturer and distributor
of medical products, is an Ohio corporation with its
principal place of business in the State of California.
In May 2002, [Inhalation Plastics] entered into a series of
agreements with Medex CP, including an Asset Purchase
Agreement (“the APA” or “the Agreement”) (Doc. 112-1), and
a Machinery and Equipment Production Lease (“the Production
Lease”) (Doc. 112-2), for the purpose of arranging Medex
CP’s acquisition of [Inhalation Plastics] and its business
operations.
Under these agreements, Medex CP acquired,
through sale and lease, assets and other property of
[Inhalation Plastics].
Pursuant to the APA, [Inhalation Plastics] sold to Medex CP
all of [Inhalation Plastics’] “rights, title and interest
in and to all of those assets, rights and properties, which
are used in or are related to the Business or are necessary
for the operation of the Business as presently conducted
(the “Purchased Assets”).”
(Doc. 112-1).
The Purchased
Assets included inventory, real property, and intellectual
property.
Additionally, all “tangible personal property,
including,
but
not
limited
to
machinery,
equipment,
fixtures, furniture, tools, [and] supplies . . . shall be
leased” to Medex CP in accordance with the Production
Lease.
Pursuant to the Production Lease, [Inhalation
Plastics] agreed to lease to Medex CP machinery, equipment,
and other assets necessary and utilized for the manufacture
and production of [Inhalation Plastics’] product lines.
Medex CP did not purchase the machinery and equipment
“given the unprofitable results of [Inhalation Plastics’]
business operations in recent years, including the current
year.” (Doc. 112-2). Under the Production Lease, Medex CP
agreed to pay a flat monthly payment to [Inhalation
Plastics], and “Additional Rent,” which has been referred
to as an “earnout,” based on Medex CP’s earnings from the
sale of [Inhalation Plastics] products.
. . .
In March 2005, MedVest Holdings Corporation (“MedVest
Holdings”), a holding company that owned Medex, Inc., which
in turn owned Medex CP (the separate corporate entity that
acquired the [Inhalation Plastics] business in 2002),
merged with a subsidiary of Smiths Medical Holdco Limited
(“Smiths Holdco”), Forest Acquisition Corp. As a result of
this merger, Medex CP remained a wholly owned subsidiary of
Medex, Inc., which became a subsidiary of Smiths Holdco.
On January 3, 2012, [Inhalation Plastics] filed its Third
Amended Complaint[, Doc. No. 185]. [Inhalation Plastics’]
Third Amended Complaint . . . [alleges, inter alia, that
Medex CP] breached the APA and the Production Lease by,
inter alia, assigning rights under these agreements without
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the prior written consent of [Inhalation Plastics] (Count
II). . . .
Opinion and Order, Doc. No. 251, pp. 2-5.
Discovery closed in this case on February 29, 2012.
See
Continued Preliminary Pretrial Order, Doc. No. 21; Order, Doc. No.
183.
The parties filed motions for summary judgment in March and
April 2012.
See Doc. Nos. 208, 217, 218.
On March 13, 2013, the
Court ruled on the motions for summary judgment and, inter alia,
granted Medex CP summary judgment as to Count II of the Third Amended
Complaint.
Opinion and Order, Doc. No. 251, pp. 27-33.
The Court
also concluded that Medex CP had waived the attorney client privilege
that may have otherwise applied to 347 documents that Medex CP had
produced on May 30, 2011.
Id. at pp. 5-14.
IPI now seeks additional discovery related to Count II of the
Third Amended Complaint.
IPI argues that discovery should be reopened
because there has been a subject-matter waiver of the attorney-client
privilege with respect to the assignment dispute and that, “[i]n
fairness, it is only appropriate that IPI be given the opportunity to
conduct limited discovery concerning the information just recently
determined to have been waived.”
IPI’s Motion, pp. 1, 7.
IPI
contends that the 347 documents and the proposed discovery will
demonstrate that there are genuine issues of material fact concerning
(1) when and whether MedexCP was truly ‘merged’ into the
other Smith entities as the Court believed; (2) why it was
not ‘merged’ with the totality of the other subsidiaries at
the same time they were merged into the Smith entities; and
(3) which employees/company actually used the leased
equipment during the period of time before MedexCP was
legally merged into a Smith entity — if it ever was.
IPI’s Motion, p. 6.
IPI contends that
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[i]f MedexCP was not merged and remained a stand-alone
entity, and if, as it appears, it was not the entity or
personnel operating or using the equipment subject to the
lease, then genuine issues exist as to whether there was a
‘use’ or a de facto assignment of the lease in violation of
the lease agreement.
If that is the case, then the Court
was incorrect in basing its analysis upon the existence of
a non-existent merger.
IPI’s Motion, p. 6.
II.
Standard
Rule 16(b) of the Federal Rules of Civil Procedure requires that
the Court, in each civil action not exempt from the operation of the
rule, enter a scheduling order that limits the time by which , inter
alia, discovery must be completed and dispositive motions may be
filed.
Fed. R. Civ. P. 16(b)(1), (b)(3)(A).
The rule further
provides that “[a] schedule may be modified only for good cause and
with the judge’s consent.”
Fed. R. Civ. P. 16(b)(4).
See also S.D.
Ohio Civ. R. 16.2 (“[T]he Magistrate Judge is empowered to . . .
modify scheduling orders upon a showing of good cause.”).
“‘The
primary measure of Rule 16’s ‘good cause’ standard is the moving
party’s diligence in attempting to meet the case management order’s
requirements.’”
Inge v. Rock Fin. Corp., 281 F.3d 613, 625 (6th Cir.
2002) (quoting Bradford v. DANA Corp., 249 F.3d 807, 809 (8th Cir.
2001)).
“A district court should also consider possible prejudice to
the party opposing the modification.”
Andretti v. Borla Performance
Indus., Inc., 426 F.3d 824, 830 (6th Cir. 2005) (citing Inge, 281 F.3d
at 625).
The focus is, however, “primarily upon the diligence of the
movant; the absence of prejudice to the opposing party is not
equivalent to a showing of good cause.”
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Ortiz v. Karnes, 2:06-cv-562,
2010 WL 2991501, at *1 (S.D. Ohio July 26, 2010) (citing Tschantz v.
McCann, 160 F.R.D. 568, 571 (N.D. Ind. 1995)).
Whether to grant leave
under Rule 16(b) falls within the district court’s discretion.
Leary
v. Daeschner, 349 F.3d 888, 909 (6th Cir. 2003).
III. Discussion
In ruling on the motions for summary judgment, the Court found
that,
in 2005, MedVest Holdings, the holding company that owned
Medex, Inc., which in turn owned Medex CP (the separate
corporate entity that acquired the [Inhalation Plastics]
business in 2002), merged with a subsidiary of Smiths
Holdco.
As a result of this merger, Medex CP remained a
wholly owned subsidiary of Medex, Inc., which became a
subsidiary of Smiths Holdco. Medex CP remained a separate,
active corporate entity after the merger.
Thus, while
Medex CP did not merge with any other corporate entity, the
corporate ownership structure changed after the MedVest
Holdings/Smiths Holdco merger.
Opinion and Order, Doc. No. 251, p. 30.
The Court further found that
Inhalation Plastics “present[ed] no evidence of an assignment from
Medex CP to another entity,” that IPI’s arguments were
“speculate[ve],” and that there was “no genuine issue as to whether
Medex CP breached the APA or the Production Lease by impermissibly
assigning rights or interests.”
Id. at pp. 32-33.
The Court
accordingly granted Medex CP summary judgment on Count II of the Third
Amended Complaint.
Id.
IPI now argues that some of the 347 documents that the Court
determined were not subject to privilege “seriously call into question
the factual underpinnings for the summary judgment decision.”
Motion, p. 3.
IPI’s
Specifically, IPI challenges the Court’s determination
that Medex CP was merged into Smiths, that “there was no contractual
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prohibition against merger,” and the fact “that a ‘Smith entity’ was
manufacturing former IPI product should come as no surprise because
those entities were all ‘merged.’”
See IPI’s Motion, p. 3.
According
to IPI, review of the 347 documents suggests “(1) an intentional
decision not to merge MedexCP into Smiths; and (2) [that] some entity
other that [sic] MedexCP — the party to the equipment lease agreement
— was using the leased equipment.”
Id.
Under those circumstances,
IPI contends, “there was a de facto contractually-prohibited
assignment of the equipment lease” and IPI is “entitle[d] to further
limited discovery.”
Id.
IPI misinterprets the Court’s March 13, 2013 Opinion and Order.
IPI argues that the 347 documents suggest, and additional discovery is
necessary to demonstrate, that Medex CP was not merged into Smiths and
that an entity other than Medex CP used the leased equipment during
the period of time before Medex CP was legally merged into a Smith
entity.
See id. at pp. 4-7.
However, the Court’s March 13, 2013
Opinion and Order specifically determined that MedVest Holdings, not
Medex CP, “merged with a subsidiary of Smiths Holdco;” Medex CP, the
Court found, “remained a separate, active corporate entity after the
merger” and “remained a wholly owned subsidiary of Medex, Inc.”
Opinion and Order, Doc. No. 251, p. 30.
The Court’s March 13, 2013 Opinion and Order expressly found that
Medex CP was not merged into Smiths.
It is therefore unnecessary to
reopen discovery for the purpose of determining whether or when a
merger occurred and if an entity other than Medex CP used the leased
equipment during the period of time before Medex CP was legally merged
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into a Smith entity.
This conclusion would not change even if the
Court found a waiver of the attorney client privilege relevant to the
assignment dispute because, as discussed supra, the discovery sought
by IPI would not impact the Court’s March 13, 2013 Opinion and Order.
IPI has accordingly failed to establish good cause for modifying
the scheduling order and to permit additional discovery.
A motion to
reconsider the Court’s summary judgment ruling on the basis of the
anticipated additional discovery is likewise without merit.
Accordingly, based on the foregoing, IPI’s Motion, Doc. No. 254,
is DENIED.
May 6, 2013
s/Norah McCann King_______
Norah McCann King
United States Magistrate Judge
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