Healthwerks Inc et al v. Stryker Spine

Filing 39

ORDER signed by Judge J P Stadtmueller on 9/5/14: denying 6 Defendant's Motion to Dismiss or Stay Pending Arbitration; denying 9 Plaintiffs' Motion to Stay Arbitration Proceedings; denying without prejudice 24 Plaintiffs' Moti on for Summary Judgment; denying as moot 28 Defendant's Motion to Stay Briefing on Plaintiffs' Motion for Summary Judgment; denying as moot 34 Defendant's Motion for Leave to File a reply in support of its motion to stay briefing on Plaintiffs' motion for summary judgment; denying as moot 37 Defendant's Motion to Strike 36 Plaintiffs' letter concerning summary judgment briefing; and that the Defendant shall file and serve an answer to Plaintiffs' complaint within 21 days of the date of this order. See Order. (cc: all counsel) (nm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
HEALTHWERKS, INC.,
SPINE GROUP OF WISCONSIN, LLC,
GREAT LAKES SPINE GROUP, LLC, and
PAUL R. BREITENBACH,

Case No. 14-CV-93-JPS

Plaintiffs,
and
BIOMET SPINE, LLC,
Involuntary Plaintiff,

ORDER

v.
STRYKER SPINE,
Defendant.
1.

OVERVIEW
Earlier this year, plaintiffs Healthwerks, Inc. (“Healthwerks”), Spine

Group of Wisconsin, LLC (“Spine Group”), Great Lakes Spine Group, LLC
(“Great Lakes”), Paul R. Breitenbach (“Breitenbach”) and Biomet Spine, LLC
(“Biomet”)1 filed a complaint in the Ozaukee County Circuit Court in the
State of Wisconsin against defendant Stryker Spine (“Stryker”) seeking a
declaratory judgment that, as of January 1, 2011 (and through the present),
Plaintiffs owe no obligations to Stryker under either of two commercial
contracts signed in January 2008. (Docket #1-1).

1

Biomet is an involuntary plaintiff.

In response, Stryker removed Plaintiffs’ case to this court (Docket #1)
and filed a motion to dismiss the suit on grounds that arbitration is the only
proper venue (Docket #6). See Federal Rule of Civil Procedure 12(b)(3).2
2.

UNDISPUTED FACTS3
In January 2008, Stryker (a New Jersey-based manufacturer of spine-

related products) entered into two “exclusive” agency agreements with
Spine Group for distribution of Stryker’s products in a portion of the
Midwest (together, the “Agency Agreements”). (Docket #7-1 at 5-59 and
61-106).4
Each of the Agency Agreements provides for resolution of “any
dispute arising out of or relating to the performance of th[e] Agreement” by
“final and binding arbitration…in Newark, New Jersey.” (Docket #7-1 at 48
and 101).5 Notwithstanding those terms, the same contractual subsections

2

Stryker’s notice of removal seeks to invoke this Court’s diversity
jurisdiction under 28 U.S.C. § 1332. (Docket #1). Finding Striker’s allegations with
regard to the citizenship of members of the various limited liability companies
named in the complaint (Docket #1-1) to be inadequate, the Court directed the
parties to file a joint submission substantiating their reliance on diversity of
citizenship for federal jurisdiction under 28 U.S.C. § 1332. (Docket #16). Having
reviewed the parties’ joint submission (Docket #19), the Court is satisfied that this
civil action is between “citizens of different States” within the meaning of 28 U.S.C.
§ 1332.
3

“When ruling on a motion to dismiss for improper venue, the district court
is not ‘obligated to limit its consideration to the pleadings [or to] convert the motion
to one for summary judgment’ if the parties submit evidence outside the
pleadings.” Faulkenberg v. CB Tax Franchise Systems, LP, 637 F.3d 801, 809-810 (7th
Cir. 2011) (quoting Cont'l Cas. Co. v. Am. Nat’l Ins. Co., 417 F.3d 727, 733 (7th Cir.
2005)).
4

These agreements were also countersigned by Great Lakes (as an affiliated
company of Spine Group) and Breitenbach (as a “Principal”). Id.
5

Page references refer to ECF pagination unless the context requires
otherwise.

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permit a concurrent “judicial proceeding” seeking “specific performance,
injunctive relief and/or any other equitable remedy” in “either the Federal or
State courts located in the State of New Jersey,….” (Id. at 49 and 102).
Notably, each of the Agency Agreements states that “[n]o
modifications or waiver of any part of th[e] Agreement shall be binding upon
either party unless in writing.” (Id. at 47 and 100).
With regard to the duration of the Agency Agreements, Eric Romsey
(Midwest Area Director for Stryker) declares that those agreements each
expired on December 31, 2010, by their terms. (Id. at ¶¶ 1-10). However,
according to Romsey, “[a]fter January 1, 2011, without a new written agency
agreement in place, Stryker and [Spine Group] (and Great Lakes and
Breitenbach) continued to operate under the terms of the [Agency]
Agreements.” (Docket #7-1 at 2). In contrast, Plaintiffs seek a declaratory
judgment that, as of January 1, 2011 (and through the present), Plaintiffs owe
no obligations to Stryker under either of the Agency Agreements. (Docket
#1-1 at 12-13).
3.

ANALYSIS
As a general matter, the [Federal Arbitration Act (“FAA”)]
provides that an arbitration provision in a “contract evidencing
a transaction involving commerce…shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.” 9 U.S.C. § 2. The
Supreme Court has explained that the FAA “establishes that,
as a matter of federal law, any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration.”
Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Notwithstanding
this strong federal policy in favor of arbitration, the FAA's
provisions are “not to be construed so broadly as to include
claims that were never intended for arbitration.” Am. United
Logistics, Inc. v. Catellus Dev. Corp., 319 F.3d 921, 929 (7th
Cir.2003)…. Whether the parties have validly agreed to

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arbitrate is governed by state-law principles of contract
formation.”
Faulkenberg, 637 F.3d at 808-809.
As noted above, the parties in this case agree that the Agency
Agreements expired by their terms on December 31, 2010. (Docket #7-1 at
¶¶ 1-10). Therefore, Stryker argues that a contract—the terms of which
mirror the Agency Agreements—has been implied by the parties’ postexpiration course of conduct. See (Docket #7 at 4).6 Plaintiffs, in opposition,
argue that “[w]hile Stryker and Spine Group may have continued to do
business after January 1, 2011, there is no evidence that the parties’
performance ever contemplated an agreement to arbitrate disputes.” (Docket
#21 at 3).
Under Wisconsin law, “[a]n implied contract may be established by
the parties’ conduct without any words being expressed in writing or orally,
if from such conduct it can fairly be inferred that the parties mutually
intended to agree on all the terms.” Dickman v. Vollmer, 303 Wis.2d 241, 253
(Wis. Ct. App. 2007) (emphasis added).7
To support its position, Stryker offers a letter, dated July 25, 2011,
wherein counsel for Spine Group expressed his “understanding” that “under
the terms of the Agency Agreements…, [Spine Group’s] representation of
[the products] of Orthovita, Inc., a [newly-acquired] wholly owned

6

Stryker concedes (and Plaintiffs agree) that no survival clause applies to the
arbitration provisions of the Agency Agreements. See (Docket #7 at 9, n.4); (Docket
#21 at 2).
7

Although courts normally respect the law chosen by the parties’ contract
—here, that is “the laws of the State of New Jersey, without regard to the principles
thereof regarding conflicts of laws” (Docket #7-1 at 48 and 101)—none of the
parties’ briefing on Stryker’s Rule 12(b)(3) motion cites any New Jersey law. See
(Docket #7, #21, and #23). Rather, Wisconsin state law is cited sporadically. (Docket
#7 at n.2); (Docket #21 at 9); (Docket #23 at 4).

Page 4 of 7

subdivision of Stryker Corporation, is not competitive to Stryker
Corporation.” (Docket #71 at 108); (Docket #7 at 4). That letter, Plaintiffs
contend, “…merely recognized that Spine Group was, at that time, subject
to the [Agency Agreement’s] one-year-post-termination non-compete
provisions.” (Docket #21 at 10).
In the Court’s view, Plaintiffs’ narrow reading of that letter is further
bolstered by Stryker’s briefing: if the terms of the parties’ post-expiration
course of conduct mirror the terms of the Agency Agreements (as Stryker
argues), why does Stryker not cite any New Jersey law—which was expressly
chosen in the Agency Agreements—whatsoever?
Moreover, as noted above in Section Two, each of the Agency
Agreements provides that “[n]o modifications or waiver of any part of th[e]
Agreement shall be binding upon either party unless in writing.” (Docket
#7-1 at 47 and 100); (Docket #21 at 9). Here, it is undisputed that the Agency
Agreements expired by their terms on December 31, 2010. (Docket #7-1 at
¶¶ 1-10). To be sure, the record contains no evidence of a written
modification of the Agency Agreements’ terms. Nissan North America, Inc. v.
Jim M’Lady Oldsmobile, Inc., 486 F.3d 989, 997 (7th Cir. 2007) (“Nissan’s
argument would render meaningless the provision of the Dealer Agreement
that required all changes to the agreement to be made in a writing signed by
both parties.”).
Finding no evidence in the present record that the parties’
post-expiration performance ever contemplated an agreement to arbitrate
disputes, the Court is obliged to deny Stryker’s motion to dismiss for
improper venue. (Docket #6). Accordingly, Stryker’s concomitant request to
stay Healthwerks’s and Biomet’s claims “pending arbitration” will be denied
as moot. (Docket #6).

Page 5 of 7

4.

PLAINTIFFS’ MOTIONS
SUMMARY JUDGMENT

FOR

AN

INJUNCTION

AND

Plaintiffs’ motion for an order enjoining arbitration proceedings
initiated by Stryker (Docket #9) will be denied because Plaintiffs cite no
controlling legal authority for the relief they request. See (Docket #9 and #11).
Lastly, Plaintiffs’ motion for summary judgment (Docket #24)—filed
shortly after Defendant’s motion to dismiss (Docket #6)—will be denied
without prejudice to allow Stryker to answer Plaintiffs’ complaint and
conduct discovery attendant to Stryker’s nascent defense that an implied
contract (whose contours the record does not yet define) was formed through
the parties’ post-expiration performance. See (Docket #7-1 at ¶¶ 11-12).
Therefore, the Court will deny as moot Stryker’s motions: (i) to stay briefing
on Plaintiffs’ motion for summary judgment (Docket #28); (ii) for leave to file
a reply in support of Stryker’s motion to stay briefing on Plaintiffs’ motion
for summary judgment (Docket #34); and (iii) motion to strike (Docket #37)
Plaintiffs’ letter concerning summary judgment briefing (Docket #36).
Accordingly,
IT IS ORDERED that the defendant’s motion to dismiss or stay
pending arbitration (Docket #6) be and the same is hereby DENIED;
IT IS FURTHER ORDERED that Plaintiffs’ motion to stay arbitration
proceedings (Docket #9) be and the same is hereby DENIED; and
IT IS FURTHER ORDERED that Plaintiffs’ motion for summary
judgment (Docket #24) be and the same is hereby DENIED without
prejudice;
IT IS FURTHER ORDERED that the defendant’s motion to stay
briefing on Plaintiffs’ motion for summary judgment (Docket #28) be and the
same is hereby DENIED as moot;

Page 6 of 7

IT IS FURTHER ORDERED that the defendant’s motion for leave to
file a reply in support of its motion to stay briefing on Plaintiffs’ motion for
summary judgment (Docket #34) be and the same is hereby DENIED as
moot;
IT IS FURTHER ORDERED that the defendant’s motion to strike
(Docket #37) Plaintiffs’ letter concerning summary judgment briefing (Docket
#36) be and the same is hereby DENIED as moot; and
IT IS FURTHER ORDERED that the defendant shall file and serve an
answer to Plaintiffs’ complaint within twenty-one (21) days of the date of
this order.
Dated at Milwaukee, Wisconsin, this 5th day of September, 2014.
BY THE COURT:

J.P. Stadtmueller
U.S. District Judge

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