ORP Surgical v. Howmedica Osteonics Corp.
This text of 92 F.4th 896 (ORP Surgical v. Howmedica Osteonics Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 1 FILED United States Court of Appeals PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS February 6, 2024 Christopher M. Wolpert FOR THE TENTH CIRCUIT Clerk of Court _________________________________
ORP SURGICAL, LLC, a Colorado limited liability company; LEE PETRIDES,
Plaintiffs - Appellees/Cross- Appellants,
v. Nos. 22-1430; 22-1455
HOWMEDICA OSTEONICS CORP., a New Jersey corporation,
Defendant - Appellant/Cross- Appellee. _________________________________
Appeal from the United States District Court for the District of Colorado (D.C. No. 1:20-CV-01450-RBJ) _________________________________
Marcy G. Glenn (Maureen R. Witt and Nicholas W. Katz, Holland & Hart LLP, Denver, Colorado, and Michael D. Wexler, Seyfarth Shaw LLP, Chicago, Illinois, with her on the briefs) of Holland & Hart LLP, Denver, Colorado, for Defendant - Appellant/Cross-Appellee.
Todd E. Mair (Christopher P. Carrington with him on the briefs) of Richards Carrington, LLC, Denver, Colorado, for Plaintiffs - Appellees/Cross- Appellants. _________________________________
Before PHILLIPS, KELLY, and ROSSMAN, Circuit Judges. _________________________________
PHILLIPS, Circuit Judge. _________________________________ Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 2
This litigation arises from the breakdown of a profitable business
relationship that ended with a cohort of disgruntled employees jumping ship
from one company to the other. At a bench trial, two corporations engaged in
the medical-device-sales industry levied claims and crossclaims against each
other for breach of their two sales agreements, governed by New Jersey law.
After trial, the district court entered judgment for ORP Surgical, LLC (ORP),
and awarded damages, attorneys’ fees, sanctions, and costs against Howmedica
Osteonics Corp., referred to throughout this litigation by the name of its parent
company, Stryker.
Before this court, Stryker challenges the district court’s rulings that
Stryker breached the sales agreements and that ORP did not. Stryker also
contests the attorneys’ fees award, arguing that the district court misconstrued
New Jersey law as requiring Stryker to indemnify ORP. On cross-appeal, ORP
challenges the court’s awarding mere nominal damages—not compensatory
damages—for Stryker’s breach of the non-solicitation/non-diversion provision
under one of the agreements.
We affirm in part and reverse in part. As to the judgment entered for ORP
on the breach-of-contract claims and all crossclaims and the award of nominal
damages, we affirm. As to the attorneys’ fees awarded under the
indemnification provision, we reverse. We therefore vacate the attorneys’ fees
award and remand for further proceedings consistent with this opinion.
2 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 3
BACKGROUND
I. Factual Background
Stryker makes medical devices and sells them to hospital surgeons. ORP
is a Colorado-based company that sells medical devices throughout the region.
Lee Petrides is the sole Manager of ORP and a named plaintiff in this litigation.
In the early 2000s, ORP and Stryker entered into a successful business
relationship in which ORP sold Stryker’s products in the Colorado region on
commission. Though Stryker also sold some products in the region through its
own sales subsidiary, Summit Surgical, a substantial portion of the regional
sales were carried out by ORP sales representatives (“ORP reps” or “the reps”).
ORP reps “require[d] a specialized skillset” to sell Stryker’s products. ORP
Surgical, LLP v. Howmedica Osteonics Corp., No. 20-CV-01450, 2022 WL
4298189, at *1 (D. Colo. Aug. 15, 2022). Successful sales depended on the reps
developing “relationships with the surgeons to whom they sell” and “sufficient
medical knowledge to advise and guide the surgeons in the use of Stryker
products from inside the operating room.” Id. The upshot is that Stryker and
ORP worked closely together. These companies and their employees knew each
other intimately and relied on one another to succeed.
ORP sold two types of Stryker products: joint replacements and trauma
devices. For each of the two product types, ORP and Stryker entered a sales
contract, the Joint Sales Representative Agreement (JSRA) and the Trauma
3 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 4
Sales Representative Agreement (TSRA), collectively, “the SRAs.” These
contracts mirror each other, particularly the sections at issue in this appeal.
The SRAs contain these provisions, summarized as follows:
• Section 2: Either party may terminate the contract for “any reason, or no reason,” with a 30-day written notice, and “in accordance with the provisions in Section 15.” App. vol. 7, at 1475, 1500.
• Section 6.1: ORP will “use best efforts” to promote Stryker’s products and “develop [Stryker’s] goodwill within the [sales territory].” Id. at 1476, 1501.
• Section 6.2: ORP has the “right to determine the means, methods, and resources” it “deems appropriate to sell and promote” Stryker products in its designated sales territory, provided that ORP “conduct itself and perform such activities to the standards and satisfaction of Stryker.” Id.
• Section 6.3: ORP may not “directly or indirectly” promote or sell products competitive with any of Stryker’s products, except for those included in a list of “Exempt Products” attached to the TSRA, which products ORP may sell to further Stryker’s best interest in servicing the needs of its client hospitals and surgeons. Id.
• Section 6.4: Except for the “Exempt Products” attached to the TSRA, ORP cannot sell any products that compete with Stryker’s products, but “nothing contained herein in any way limits [ORP’s] unfettered right to represent, market, distribute or sell products that are not competitive with any of [Stryker’s products] or that do not conflict with the best interests of [Stryker].” Id. at 1477, 1502.
• Section 7.3: ORP will ensure at its own expense that “all [ORP reps] acting on behalf of [Stryker] in the [sales territory] comply with any
4 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 5
rules, regulations and policies imposed by [Stryker’s] customers.” Id. at 1478, 1503.
• Section 13.11: ORP warrants that each ORP rep will “comply with all applicable laws, rules and regulations of any local, state, and federal governmental body, agency or board having jurisdiction.” Id. at 1481, 1506.
• Section 15.1: Either party may terminate the contract “upon the occurrence of any . . . breach of any provision of this Agreement that is not cured within ten (10) business days after receipt of written notice thereof from the other Party.” Id. at 1484, 1509.
• Section 16.1: For one year after the end or termination of the agreement, ORP agrees not to compete, that is, “participate, in any manner whatsoever, in the sale, promotion, marketing, distribution or delivery of medical device products to or for any person” in Stryker’s sales territory, and ORP agrees not to solicit Stryker’s customers or employees. Id. at 1485–86, 1510–11.
• Section 16.2 (non-solicitation/non-diversion provision): Stryker agrees that for one year after termination of the agreement it will “not directly or indirectly divert or solicit, or attempt to divert or solicit, any current employee or independent contractor working for [ORP].” Id.
Free access — add to your briefcase to read the full text and ask questions with AI
Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 1 FILED United States Court of Appeals PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS February 6, 2024 Christopher M. Wolpert FOR THE TENTH CIRCUIT Clerk of Court _________________________________
ORP SURGICAL, LLC, a Colorado limited liability company; LEE PETRIDES,
Plaintiffs - Appellees/Cross- Appellants,
v. Nos. 22-1430; 22-1455
HOWMEDICA OSTEONICS CORP., a New Jersey corporation,
Defendant - Appellant/Cross- Appellee. _________________________________
Appeal from the United States District Court for the District of Colorado (D.C. No. 1:20-CV-01450-RBJ) _________________________________
Marcy G. Glenn (Maureen R. Witt and Nicholas W. Katz, Holland & Hart LLP, Denver, Colorado, and Michael D. Wexler, Seyfarth Shaw LLP, Chicago, Illinois, with her on the briefs) of Holland & Hart LLP, Denver, Colorado, for Defendant - Appellant/Cross-Appellee.
Todd E. Mair (Christopher P. Carrington with him on the briefs) of Richards Carrington, LLC, Denver, Colorado, for Plaintiffs - Appellees/Cross- Appellants. _________________________________
Before PHILLIPS, KELLY, and ROSSMAN, Circuit Judges. _________________________________
PHILLIPS, Circuit Judge. _________________________________ Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 2
This litigation arises from the breakdown of a profitable business
relationship that ended with a cohort of disgruntled employees jumping ship
from one company to the other. At a bench trial, two corporations engaged in
the medical-device-sales industry levied claims and crossclaims against each
other for breach of their two sales agreements, governed by New Jersey law.
After trial, the district court entered judgment for ORP Surgical, LLC (ORP),
and awarded damages, attorneys’ fees, sanctions, and costs against Howmedica
Osteonics Corp., referred to throughout this litigation by the name of its parent
company, Stryker.
Before this court, Stryker challenges the district court’s rulings that
Stryker breached the sales agreements and that ORP did not. Stryker also
contests the attorneys’ fees award, arguing that the district court misconstrued
New Jersey law as requiring Stryker to indemnify ORP. On cross-appeal, ORP
challenges the court’s awarding mere nominal damages—not compensatory
damages—for Stryker’s breach of the non-solicitation/non-diversion provision
under one of the agreements.
We affirm in part and reverse in part. As to the judgment entered for ORP
on the breach-of-contract claims and all crossclaims and the award of nominal
damages, we affirm. As to the attorneys’ fees awarded under the
indemnification provision, we reverse. We therefore vacate the attorneys’ fees
award and remand for further proceedings consistent with this opinion.
2 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 3
BACKGROUND
I. Factual Background
Stryker makes medical devices and sells them to hospital surgeons. ORP
is a Colorado-based company that sells medical devices throughout the region.
Lee Petrides is the sole Manager of ORP and a named plaintiff in this litigation.
In the early 2000s, ORP and Stryker entered into a successful business
relationship in which ORP sold Stryker’s products in the Colorado region on
commission. Though Stryker also sold some products in the region through its
own sales subsidiary, Summit Surgical, a substantial portion of the regional
sales were carried out by ORP sales representatives (“ORP reps” or “the reps”).
ORP reps “require[d] a specialized skillset” to sell Stryker’s products. ORP
Surgical, LLP v. Howmedica Osteonics Corp., No. 20-CV-01450, 2022 WL
4298189, at *1 (D. Colo. Aug. 15, 2022). Successful sales depended on the reps
developing “relationships with the surgeons to whom they sell” and “sufficient
medical knowledge to advise and guide the surgeons in the use of Stryker
products from inside the operating room.” Id. The upshot is that Stryker and
ORP worked closely together. These companies and their employees knew each
other intimately and relied on one another to succeed.
ORP sold two types of Stryker products: joint replacements and trauma
devices. For each of the two product types, ORP and Stryker entered a sales
contract, the Joint Sales Representative Agreement (JSRA) and the Trauma
3 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 4
Sales Representative Agreement (TSRA), collectively, “the SRAs.” These
contracts mirror each other, particularly the sections at issue in this appeal.
The SRAs contain these provisions, summarized as follows:
• Section 2: Either party may terminate the contract for “any reason, or no reason,” with a 30-day written notice, and “in accordance with the provisions in Section 15.” App. vol. 7, at 1475, 1500.
• Section 6.1: ORP will “use best efforts” to promote Stryker’s products and “develop [Stryker’s] goodwill within the [sales territory].” Id. at 1476, 1501.
• Section 6.2: ORP has the “right to determine the means, methods, and resources” it “deems appropriate to sell and promote” Stryker products in its designated sales territory, provided that ORP “conduct itself and perform such activities to the standards and satisfaction of Stryker.” Id.
• Section 6.3: ORP may not “directly or indirectly” promote or sell products competitive with any of Stryker’s products, except for those included in a list of “Exempt Products” attached to the TSRA, which products ORP may sell to further Stryker’s best interest in servicing the needs of its client hospitals and surgeons. Id.
• Section 6.4: Except for the “Exempt Products” attached to the TSRA, ORP cannot sell any products that compete with Stryker’s products, but “nothing contained herein in any way limits [ORP’s] unfettered right to represent, market, distribute or sell products that are not competitive with any of [Stryker’s products] or that do not conflict with the best interests of [Stryker].” Id. at 1477, 1502.
• Section 7.3: ORP will ensure at its own expense that “all [ORP reps] acting on behalf of [Stryker] in the [sales territory] comply with any
4 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 5
rules, regulations and policies imposed by [Stryker’s] customers.” Id. at 1478, 1503.
• Section 13.11: ORP warrants that each ORP rep will “comply with all applicable laws, rules and regulations of any local, state, and federal governmental body, agency or board having jurisdiction.” Id. at 1481, 1506.
• Section 15.1: Either party may terminate the contract “upon the occurrence of any . . . breach of any provision of this Agreement that is not cured within ten (10) business days after receipt of written notice thereof from the other Party.” Id. at 1484, 1509.
• Section 16.1: For one year after the end or termination of the agreement, ORP agrees not to compete, that is, “participate, in any manner whatsoever, in the sale, promotion, marketing, distribution or delivery of medical device products to or for any person” in Stryker’s sales territory, and ORP agrees not to solicit Stryker’s customers or employees. Id. at 1485–86, 1510–11.
• Section 16.2 (non-solicitation/non-diversion provision): Stryker agrees that for one year after termination of the agreement it will “not directly or indirectly divert or solicit, or attempt to divert or solicit, any current employee or independent contractor working for [ORP].” Id. at 1486, 1511.
• Section 16.3: During the one-year noncompete period, Stryker will “make payments to [ORP] on a monthly basis (the ‘[r]estriction [p]ayments’) in an amount equal to one-twelfth (1/12) of the aggregate commissions paid to [ORP] by [Stryker]” for twelve months before the agreement terminates. Id.
• Section 16.4: Stryker is released from paying ORP the restriction payments if Stryker terminates the agreement for “cause,” with “cause” defined as any breach of the terms or conditions in the agreement, among other things. Id.
5 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 6
• Section 18 (indemnification provision): “Either party shall indemnify, defend, exonerate, and hold the other harmless” for “any and all claims, suits, liability, loss, costs, expenses (including . . . reasonable attorneys’ fees and expenses).” Id. at 1487, 1512.
• Section 22 (non-waiver provision): Either party’s failure “to enforce any provision(s) of this Agreement shall not constitute or be construed as a waiver of the provision(s).” Id. at 1488, 1513.
This relationship began in 2001 and worked well for many years; in
August 2018, the parties renewed the SRAs.
But everything started to go downhill in October 2018, when a
Houston-based Stryker employee, Adam Jacobs, became Stryker’s new Vice
President of Sales for the Rocky Mountain region. In late March 2019, Jacobs
terminated the JSRA for cause. Because the termination was for cause, Jacobs
claimed that, under Section 16.4, Stryker needn’t pay the restriction payments.
In response, ORP denied any breach and insisted that Stryker pay the restriction
payments.
In June 2019, Jacobs approached Petrides with new proposed terms for
terminating the JSRA: Stryker would agree to pay ORP the twelve months of
restriction payments if ORP agreed to waive the non-solicitation/non-diversion
provision covering the reps. Stryker wanted ORP to waive the provision so that
Stryker could hire James Demorset, an ORP sales rep. Petrides rejected the
offer. But then, in October 2019, Stryker hired Demorset anyway.
6 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 7
Earlier, in September 2019, Jacobs emailed Petrides to initiate a
“mutually agreeable termination” of the TSRA. App. vol. 7, at 1563. Jacobs
pitched Petrides two alternatives for terminating the TSRA: (1) ORP would be
subsumed as Stryker’s agent; or (2) Stryker would buy out ORP for $8 million,
pay no restriction payments, and be free of the non-solicitation/non-diversion
provision.
At this point, Jacobs and Petrides met at a Starbucks to discuss the
termination offer. During this meeting, Petrides wrote his terms on a sticky
note, counteroffering to settle for $13.6 million. Petrides claims that Jacobs
accepted the offer then and there; Jacobs claims that he told Petrides he was
generally amenable to a deal but that he needed to consider the specific terms.
During the next few months, Jacobs frequently communicated with ORP
reps through phone calls, dinners, and in-person meetings. Then, on March 31,
2020, Jacobs emailed Petrides with a proposal for $13.6 million, conditional on
ORP’s promise to waive the non-solicitation/non-diversion provision so that
Stryker could hire fourteen ORP reps. To reach the $13.6 million sum, Stryker
offered an initial $8 million for the cost of terminating the TSRA and ORP’s
waiving the non-solicitation/non-diversion provision, plus an additional dollar
amount for each rep it acquired from ORP. Thus, the $13.6 million depended on
Stryker getting all the reps it wanted from ORP.
7 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 8
According to Petrides, Jacobs declared that he would terminate the TSRA
for cause unless the parties had a signed deal by that Friday, April 3, 2020.
Jacobs denied ever threatening Petrides to sign the proposed buyout deal.
On April 3, 2020, Petrides instead voluntarily terminated the TSRA.
Petrides apparently sought to beat Jacobs to the punch. The April 3, 2020
termination started the 30-day clock under Section 2, meaning that absent a
cure of the breach, the TSRA would officially terminate at 11:59:59 p.m. on
May 3, 2020. That evening of April 3, 2020, Jacobs emailed all the ORP reps
about the TSRA’s termination and notified them that Stryker personnel would
be reaching out to discuss the “transition.” App. vol. 9, at 1662.
The next day was eventful. Beginning in the early morning hours,
Jacobs’s email to his so-called ORP “dream team” was met with a
near-instantaneous flurry of responses from ORP reps expressing their desire to
join Stryker. For the next month, as shown by phone records and email logs,
Stryker executives frequently contacted ORP reps. Some of these conversations
included discussions of the noncompete language in ORP contracts, questions
about Stryker’s offering legal representation, and inquiries about Stryker’s
online job applications.
A month later on May 4, 2020, mere hours after the TSRA officially
terminated, a dozen ORP reps emailed their resignations to Petrides and
accepted offers at Stryker. Within the month, ORP sued Stryker.
8 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 9
II. Procedural Background
In its final amended complaint, ORP made six claims for relief, two of
which were tried before the district court: breach of contract and corporate
raiding. 1 Stryker answered with several counterclaims: breach of contract under
both SRAs, unfair trade practices, and tortious interference of contract, which
specifically identified Stryker’s former employee, Morgan Schilling. 2
During an eight-day bench trial, the district court heard testimony from
the key players: Petrides, Jacobs, ORP reps (Matthew Corcoran, Ryan Dunn,
James Beddall, Brett Bakersky, Hayden Spellbring, Austin Olson, Craig Frey,
Parthenios “Peter” Henderson), and Stryker executives (Tim Sebald, Michael
Bonessi, Scott Curtis). ORP also called witnesses to defend against Stryker’s
counterclaims, including Dr. Mark Tuttle, one of Stryker’s surgeons, who
testified to the differences between Stryker’s products and similar products
1 In its final amended complaint, ORP also raised claims for unjust enrichment, intentional interference with existing contractual relationships, intentional interference with prospective business relations, and violation of the Colorado Wholesale Sales Representatives Act, Colo. Rev. Stat. § 13-21-1303 (2023). ORP voluntarily dismissed three of these claims before trial, and the parties agreed to dismiss the fourth during a pretrial conference. ORP separately sued the reps that fled to Stryker. Those cases have settled. 2 Stryker sued Morgan Schilling, former Trauma Sales Manager at Summit Surgical, separately in New Jersey federal district court. A New Jersey federal magistrate judge ordered the case to mediation, set for February 2024. Text Order, Howmedica Osteonics Corp. v. Schilling, 20-CV-09621 (D.N.J. Oct. 4, 2023), ECF No. 187. At the time of this writing, discovery in that case is ongoing.
9 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 10
from other manufacturers. The court also heard testimony from competing
damages experts.
The district court entered judgment for ORP on the breach-of-contract
claims and all counterclaims. After entry of the final judgment, ORP moved
under Rule 59(e) for the court to alter or amend its judgment to deny Special
Master’s fees and to award actual damages for Stryker’s soliciting Demorset.
Similarly, Stryker moved under Rules 52(b) and 59(e) for the court to not
award ORP attorneys’ fees under the SRAs’ indemnification provision and to
make two clarifications related to the prejudgment interest award. 3
The district court granted in part and denied in part the parties’ post-trial
motions. On attorneys’ fees, the district court declined Stryker’s request to
modify the judgment. Interpreting the indemnification provision under New
Jersey law, the court again ruled that the provision encompasses first-party
indemnity claims. But the court did amend the judgment to clarify the award of
prejudgment interest, as Stryker requested. 4
3 Stryker’s post-trial motion raised two challenges related to prejudgment interest: (1) the docket entry for the court’s “Final Judgment” was not, in fact, final because prejudgment interest was undetermined; and (2) New Jersey law required the court to identify the equitable considerations in favor of awarding prejudgment interest, which it failed to do. 4 In response to Stryker’s motion, the court amended the docket entry from “Final Judgment” to “Judgment,” and it added a footnote to its amended findings that articulated the equitable interests supporting the prejudgment interest award, in accordance with New Jersey law. App. vol. 5, at 1120 n.10 (footnote continued) 10 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 11
In response to ORP’s motion, the court agreed with ORP that the Special
Master’s fees were subsumed under the existing attorneys’ fees award, and that
some other form of sanctions was needed to compensate ORP for Stryker’s
discovery misconduct. So the court amended its order to award “attorney’s fees
and costs incurred in the related state court litigation as a result of Stryker[’s]
. . . discovery misconduct.” App. vol. 5, at 1060. And finally, regarding
Demorset, the court denied ORP’s request for damages because ORP had failed
to prove that Stryker solicited Demorset in breach of the JSRA.
Accordingly, the court entered an amended findings of fact, conclusions
of law, and order of judgment. See ORP Surgical, 2022 WL 4298189, at *1.
Those amended findings and conclusions are the basis of this appeal.
The judgment was amended twice more in response to additional post-
trial motions on attorneys’ fees, sanctions, costs, and prejudgment interest,
which are not relevant to the substantive issues raised on appeal. 5 The district
(quoting W.R. Huff Asset Mgmt. Co. v. William Soroka 1989 Tr., No. 04-CV- 3093, 2009 WL 2436692, at *1 (D.N.J. Aug. 6, 2009)). 5 The district court’s initial findings of fact, conclusions of law, and order of judgment were entered on May 10, 2022. ORP Surgical, LLP v. Howmedica Osteonics Corp., No. 20-CV-01450, 2022 WL 1468115 (D. Colo. May 10, 2022). Both parties then filed various post-trial motions to amend or alter the judgment. The district court amended its findings of fact and conclusions of law accordingly, and on August 15, 2022, entered its final findings and conclusions. ORP Surgical, 2022 WL 4298189, at *1. After another round of post-trial motions, the court entered an amended judgment on August 22, 2022, which ordered Stryker to reimburse ORP for 90% of its reasonable attorneys’ fees for the costs incurred in recovering spoliated (footnote continued) 11 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 12
court entered an order dispensing with these remaining post-trial motions, and
it separately entered an amended order and final judgment (1) in favor of
Stryker on the corporate raiding claim, (2) in favor of ORP on the
breach-of-contract claims and all counterclaims, and (3) awarding attorneys’
fees, damages, costs, sanctions, and prejudgment and post-judgment interest in
these amounts:
• Actual damages awarded to ORP for the unpaid restriction payments due in the amount of $1,018,896.00 under the JSRA and $3,731,791.47 under the TSRA;
• Nominal damages for $1.00 awarded to ORP for Stryker’s breach of the non-solicitation/non-diversion provision under the TSRA;
• Reasonable attorneys’ fees awarded to ORP, authorized by Section 18 of the SRAs, equaling $2,285,951.50;
• Discovery sanctions awarded to ORP for $70,473.85—equaling 90% of ORP’s reasonable attorneys’ fees and costs incurred for the recovery of spoliated evidence— ¾ to be paid by Stryker, ¼ to be paid by Stryker’s counsel;
• Costs awarded to ORP equaling $98,366.22;
• Prejudgment interest awarded to ORP equaling $446,456.12; and
evidence during the state court litigation. App. vol. 5, at 1133–35. On November 14, 2022, the court entered its second amended order and judgment on the amount of attorneys’ fees, sanctions, costs, and prejudgment interest. ORP Surgical, LLP v. Howmedica Osteonics Corp., No. 20-CV-01450, 2022 WL 16924068 (D. Colo. Nov. 14, 2022). And finally, on December 27, 2022, the court entered its third and final judgment, which resolved all remaining filings, evidence, arguments, and motions related to the award of attorneys’ fees, sanctions, costs, and prejudgment and post-judgment interest. ORP Surgical, LLP v. Howmedica Osteonics Corp., 647 F. Supp. 3d 1068 (D. Colo. 2022). 12 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 13
• Post-judgment interest to be awarded according to federal rates established under 28 U.S.C. § 1961(a).
App. vol. 7, at 1428–30. See generally ORP Surgical, LLP v. Howmedica
Osteonics Corp., 647 F. Supp. 3d 1068 (D. Colo. 2022).
The parties filed timely notices of appeal and cross-appeal. 6 We have
jurisdiction under 28 U.S.C. § 1291.
DISCUSSION
Stryker presents three issues on direct appeal and ORP presents one issue
on cross-appeal. Stryker claims that the district court (1) erred in fact and law
in ruling that ORP breached neither of the SRAs and, relatedly, that Stryker
lacked cause to terminate the JSRA; (2) misinterpreted New Jersey law in
ruling that Section 18 of the SRAs covers first-party indemnification claims;
and (3) erroneously awarded ORP damages beyond those proved.
On cross-appeal, ORP claims that the district court erred by awarding
mere nominal damages for Stryker’s solicitation and diversion instead of
compensatory damages.
6 ORP and Stryker prematurely filed notices of appeal before the district court had resolved all post-trial motions and determined a sum certain amount of prejudgment interest. Accordingly, this court dismissed those appeals for lack of jurisdiction. ORP Surgical, LLC v. Howmedica Osteonics Corp., Nos. 22-1289, 22-1320, 2022 WL 19039680, at *1 (10th Cir. Oct. 26, 2022). Both parties then filed timely notices of appeal and cross-appeal after the district court entered its third amended and final judgment. 13 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 14
I. Stryker’s Factual Arguments
Stryker argues that (1) ORP’s purported breach of the JSRA gave Stryker
cause to terminate the contract, and (2) ORP breached the TSRA, eliminating
any responsibility for Stryker to pay the restriction payments. Stryker disputes
the district court’s ruling that ORP breached neither contract and that Stryker
indeed owed ORP the restriction payments. Specifically, Stryker alleges that
the district court committed seven factual errors—four in applying the JSRA
and three in applying the TSRA.
As a threshold matter, we observe that many of the district court’s
findings in this case rested on credibility determinations of the testifying
witnesses. Overall, the district court remarked that it found Stryker’s witnesses
“lacked credibility.” ORP Surgical, 2022 WL 4298189, at *7. We give those
findings the broad deference they deserve. Martin v. Gingerbread House, Inc.,
977 F.2d 1405, 1408 (10th Cir. 1992) (citing Anderson v. City of Bessemer
City, 470 U.S. 564, 575 (1985)). Yet we acknowledge that not all of Stryker’s
fact-based arguments depend on credibility. So we proceed to tick through each
of Stryker’s claims of error, grouping them according to the SRAs.
A. Standard of Review
We will not set aside fact-findings from a bench trial absent clear error.
Ryan v. Am. Nat. Energy Corp., 557 F.3d 1152, 1157 (10th Cir. 2009). To
assess whether a clear error has been made, “we must view the evidence in the
light most favorable to the district court’s ruling and must uphold any district
14 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 15
court finding that is permissible in light of the evidence.” Ramos v. Banner
Health, 1 F.4th 769, 777 (10th Cir. 2021) (cleaned up).
B. The JSRA
Stryker contends that it terminated the JSRA for cause and thus does not
owe ORP twelve months of restriction payments. Under Section 16.4, Stryker
owed ORP restriction payments if Stryker terminated without “cause.” App.
vol. 7, at 1486. The district court determined that ORP did not breach the
JSRA, that Stryker had no cause to terminate, and that therefore restriction
payments were due. On appeal, Stryker alleges that these findings were clear
error.
First, Stryker argues that it had cause to terminate the JSRA because in
November 2018 one of Stryker’s client hospitals suspended Scott Stapleford, an
ORP joint-device-sales rep and part owner of ORP. The district court found this
was immaterial and most likely a “post-hoc legal justification[]” for
terminating the contract. ORP Surgical, 2022 WL 4298189, at *5. The court
was persuaded by evidence that Stryker had known about Stapleford’s
suspension for months before terminating the JSRA, that Stryker’s own reps
had been suspended by hospitals with no disciplinary response, and that
Stapleford had been “too-ardently defending the Stryker business,” but not
necessarily adversely to Stryker’s interests. Id.
Stryker argues on appeal that Stapleford’s behavior established cause to
terminate the JSRA. Stryker contends that the district court erred by ignoring
15 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 16
the “neutral” testimony of Scott Curtis, former General Manager of Summit
Surgical, who recounted Stapleford’s wrongdoings at trial. Op. Br. at 18.
But viewing the evidence favorably to the district court’s decision, we
conclude that Curtis’s testimony bolsters the court’s finding. Curtis testified
that Stapleford almost single-handedly grew Stryker’s joint-device-sales
business, which earned the company millions. He conceded that Stapleford was
a talented sales rep. And Curtis confirmed that Stryker knew about Stapleford’s
suspension in November 2018 yet waited until March 2019 to terminate the
JSRA. For these reasons, Curtis’s testimony supports the inference that
overlooking Stapleford’s suspension served Stryker’s best interests. So we
disagree that the district court’s placing more weight on Curtis’s testimony
would have changed the outcome.
Second, Stryker alleges that ORP breached the JSRA because Stapleford
sold competitive products to Stryker’s clients. This failed to convince the
district court for two reasons. One, there was no evidence in the record to prove
that Stapleford actually sold the product to the hospital. Two, the testimony at
trial contradicted Stryker’s claim that the products were competitive with each
other.
Stryker calls foul because the JSRA prohibited ORP reps not just from
selling competitive products, but also from delivering or distributing them. And
Stryker insists the evidence shows that the product—a hip stem made by
another company, Link—was competitive. Again, the record is not on Stryker’s
16 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 17
side. We acknowledge that the evidence shows Stapleford provided one of
Stryker’s surgeons, Dr. Tuttle, with a Link hip stem after Dr. Tuttle requested
it. But there is no evidence that Stapleford sold the hip stem to Dr. Tuttle. And
even if he delivered or otherwise provided it, as Stryker alleges, the evidence
shows that the Link hip stem was not a competitive product. Dr. Tuttle testified
that the two hip stems were not interchangeable. And even Jacobs admitted that
some patients require the Link hip stem over Stryker’s analog because Stryker’s
design can risk causing their femurs to crack. So we see adequate evidence in
the record to buoy the district court’s finding that the Link hip stem and
Stryker’s product were not competitive with each other, and thus Stapleford’s
furnishing the Link hip stem to Dr. Tuttle was no cause for termination.
Third, Stryker claims that ORP’s delay in reporting its year-end invoices
in December 2018 created cause to terminate the JSRA. The district court
rejected this argument too, persuaded by testimony showing that the
misreporting was a genuine clerical error by ORP. And “most importantly,” the
court noted, Stryker hired Demorset—the individual “most responsible for the
invoice issue, which it would not have done had it believed [Demorset]
willfully defrauded Stryker.” ORP Surgical, 2022 WL 4298189, at *4.
Stryker argues that, regardless of ORP’s intentions, the delinquent
invoices per se violated the JSRA’s requirement that ORP comply with
Stryker’s internal policies. But the evidence supports the district court’s
finding that this argument is a red herring. In early January 2019, Curtis
17 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 18
reprimanded Petrides for the late invoices; Petrides explained what happened:
Demorset was newly trained on the reporting software and had simply made a
mistake, Demorset accepted full responsibility, and Stryker dropped the matter.
So the district court had good reason to wonder about Stryker’s claim that the
invoices justified terminating the JSRA in March 2019 after the issue was
apparently resolved in January 2019.
Fourth and finally, Stryker alleges that Stapleford’s insubordination to
Curtis gave Stryker cause to terminate. The district court rejected this
argument. In doing so, the court noted that Stapleford’s pugnacious business
style was known at ORP and Stryker throughout his career, yet accusations of
“insubordination” never arose before this lawsuit. Id. at *5.
We agree that the record refutes Stryker’s argument, at least in part
because it’s not clear that Stapleford can be fairly described as Curtis’s
subordinate. Curtis admitted as much in his own testimony. Stapleford was
historically unpleasant to work with, true enough, but the district court did not
clearly err in determining that his alleged insubordination gave no cause for
Stryker to terminate the JSRA.
Because the record supports the district court’s finding that Stryker
lacked cause to terminate the JSRA, Stryker was not excused from making the
restriction payments to ORP.
18 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 19
C. The TSRA Petrides’s voluntary termination of the TSRA triggered Section 16.3 of
the contract, which required Stryker to make restriction payments to ORP. But
Stryker seeks refuge under Section 16.4, arguing that ORP’s previous breach
relieved it of responsibility for those payments. The district court found no
breach, which Stryker argues was clear error.
First, Stryker alleges that ORP breached the TSRA when it sold a
competitive product to client hospitals. The allegedly competitive product (the
SegWay product) was a scope used for carpal tunnel procedures. In 2017,
Stryker purchased a company (Instratek) that made a comparable product.
When the parties renewed the TSRA in August 2018, the SegWay product was
not listed as an approved competitive product for ORP reps to sell because
Stryker wanted the reps promoting Instratek’s version.
But the district court found that Stryker failed to provide ORP with
adequate inventory and training sufficient to supply clients with the Instratek
product. This failing persisted after ORP reps requested the necessary resources
from Stryker. The court also noted that the SegWay sales comprised a mere
$150,000 of ORP’s total $25 million Stryker sales in 2019. The court therefore
concluded that Stryker’s “tacit consent” to ORP’s sales of the SegWay product
defeated any retroactive justification for withholding the restriction payments.
Id. at *6.
19 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 20
Before this court, Stryker maintains that the SegWay product was not an
approved competitive product for ORP reps to sell under the TSRA, whether
Stryker gave its “tacit consent” or not. Op. Br. at 42. But this argument fails
because the record contains an email thread that exhibits precisely what ORP
complained about: ORP requested inventory and training from Stryker for the
Instratek product; Stryker knew that ORP was selling SegWay’s product in the
interim to meet client demands; and yet, Stryker failed to supply ORP with
Instratek inventory. There is no contradictory evidence in the record. Further,
Section 6.4 of the TSRA states that “nothing contained herein in any way limits
[ORP’s] unfettered right to . . . distribute or sell products . . . that do not
conflict with the best interests of [Stryker.]” App. vol. 7, at 1502. This
provision sanctions ORP’s decision to continue supplying Stryker’s hospitals—
an act clearly in Stryker’s best interests—despite Stryker’s failure to give ORP
inventory from its preferred manufacturer. We have no reason to overturn the
district court’s finding on this point.
Second, Stryker claims that ORP violated Stryker’s Trauma Inventory
Agreements (TIAs), contracts between Stryker and the hospitals. It did so,
allegedly, by reducing the hospitals’ shelf space for Stryker products and
lending more space to Stryker’s competitors. The district court dismissed this
claim for insufficient evidence. It also noted that ORP was not party to the
TIAs, implying that it would be unfair to hold ORP to those agreements.
20 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 21
On appeal, Stryker characterizes the district court’s finding as “stunning”
in view of testimony from ORP reps Frey and Henderson. Op. Br. at 45. But the
district court specifically found that Frey and Henderson were not credible
witnesses, and we see no basis to overrule that assessment. See Acosta v.
Paragon Contractors Corp., 884 F.3d 1225, 1234 (10th Cir. 2018) (noting the
“great deference” we extend to the district court’s credibility determinations
(citation omitted)). Because this argument rests entirely on witness testimony
that the district court found not credible, we cannot properly review it, let alone
reverse for clear error on this ground.
Third and finally, Stryker alleges that Morgan Schilling, a Stryker
employee and former owner of ORP, promoted ORP’s interests over Stryker’s
in violation of ORP’s contractual duty to advance Stryker’s best interests.
Stryker also argued that Schilling misrepresented his financial stake in ORP.
Yet the district court found that Stryker failed to tether this alleged coverup by
Schilling, a Stryker employee, to ORP’s compliance with the TSRA. The court
noted too that Stryker knew about Schilling’s close relationship with Petrides
and ORP. Most of all, the court admonished Stryker that its “claims against Mr.
Schilling belong in the New Jersey case, not here.” 7 ORP Surgical, 2022 WL
4298189, at *6.
7 At the time of this writing, the New Jersey litigation is ongoing, see footnote 2.
21 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 22
We agree that these claims are most appropriately adjudicated in
Stryker’s separate litigation with Schilling. And even if we were inclined to
address them here, we would not find the district court clearly erred. Stryker’s
statements that Schilling acted as ORP’s agent are entirely conclusory, and its
characterization of Schilling’s activities is unsupported by the evidence. 8 The
district court thus decided correctly that the Schilling arguments were
misplaced and factually unsound.
None of the alleged factual errors Stryker identifies amount to clear
error. And so, we move on to address Stryker’s legal claims.
II. Stryker’s Legal Arguments
Beyond its factual allegations, Stryker argues that the district court made
several subsidiary legal findings that require us to reverse. These allegedly
erroneous legal findings break down into three categories: materiality, waiver,
and lay opinion. More specifically on each, Stryker claims that the district
8 Stryker’s main argument at trial was that Schilling deceived Stryker in misreporting remuneration payments he was receiving from ORP. But the district court didn’t buy this theory. The evidence showed that Schilling owned a half stake in ORP when Stryker hired him in 2006. He then divested his shares after accepting his new job at Stryker, at Stryker’s request, to be paid out by ORP over time. ORP gave Schilling the option to buy back his shares between 2006 and 2013 at 25% interest, but Schilling never exercised the option. Nevertheless, Stryker alleged in the district court, and now on appeal, that Schilling had an outsized interest in ORP’s success to secure his financial stake. Like the district court, we disagree that the evidence supports this allegation. Also, Schilling did not testify at trial, so for that and the other reasons stated here we do not weigh in on Stryker’s claims related to Schilling. 22 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 23
court legally erred in (1) determining that ORP’s alleged breaches of the SRAs
were immaterial, and thus insufficient to breach the contracts under New Jersey
law; (2) accepting ORP’s “pretext theory” that Stryker acquiesced to ORP’s
alleged misconduct and therefore waived its right to enforce the SRAs, despite
the agreements’ non-waiver provision; and (3) relying on expert opinion
testimony “disguised” as lay opinion. Op. Br. at 13.
A. Standard of Review On the first two issues, materiality and waiver, Stryker shoehorns
fact-based issues into legal arguments, presumably to avail itself of de novo
review. But when the factual inquiries predominate in a mixed question of law
and fact, as they do here, our review is for clear error. See United States v.
Abouselman, 976 F.3d 1146, 1153–54 (10th Cir. 2020). On the third issue, lay
opinion, we review a trial court’s decision to admit evidence as expert or lay
opinion for abuse of discretion. See Ryan Dev. Co., L.C. v. Indiana
Lumbermens Mut. Ins. Co., 711 F.3d 1165, 1170 (10th Cir. 2013).
B. Materiality As a matter of law, Stryker argues that the district court erred in
assuming that Stryker’s nonperformance could be excused only by a “material
breach.” Op. Br. at 21. Stryker notes that the contract language simply required
a “breach,” and therefore the district court wrongly ignored the “cumulative
impact” of the numerous “immaterial” breaches ORP committed. Id. at 16,
20–22. Stryker argues that the district court erred because it “sliced and diced”
23 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 24
ORP’s misconduct instead of viewing it as an “organic whole.” Id. at 17, 41. In
particular, Stryker contests the district court’s determinations that three
instances were immaterial: “ORP’s late invoices, Stapleford’s suspension, and
SegWay sales.” Stryker Reply Br. at 4.
As to the invoices, Stryker decries the district court’s finding based on
“legally extraneous considerations” and urges that ORP’s “failure to timely
submit 24 invoices” violated ORP’s covenant to comply with Stryker policies.
Op. Br. at 34–36. Regarding the SegWay sales, Stryker challenges the district
court’s finding that ORP’s sales were immaterial and insists that $150,000 “is a
material amount.” Stryker Reply Br. at 19. And as for Stapleford’s suspension,
Stryker contends that this “indisputably breached the SRA” because it violated
JSRA Sections 6.1 (goodwill), 7.3 (compliance with rules and policies), and
13.11 (compliance with applicable laws). Op. Br. at 20. Stryker alleges that
ORP’s breaches under these provisions were material as a matter of law.
To buttress this proposition, Stryker cites a Third Circuit opinion saying
that if a breach of a contractual provision “excuses the future performance” by
the nonbreaching party, then “[b]y contractual definition . . . such obligations
are material.” 9 Stryker Reply Br. at 2 (quoting In re Gen. DataComm Indus.,
9 Stryker claims that New Jersey courts have applied this principle, citing as an example Dunkin’ Donuts of Am., Inc. v. Middletown Donut Corp., 495 A.2d 66 (N.J. 1985). But materiality was not at issue in Dunkin’ Donuts, and so we find that case irrelevant to this analysis.
24 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 25
Inc., 407 F.3d 616, 623 n.12, 624 (3d Cir. 2005)). But in DataComm, the Third
Circuit also recognized that “what constitutes a material breach . . . is governed
by relevant state law.” 407 F.3d at 623 (citing In re Columbia Gas Sys. Inc., 50
F.3d 233, 240 n.10 (3d Cir. 1995)). 10 And in New Jersey, materiality is a
question for the trier of fact. See Magnet Res., Inc. v. Summit MRI, Inc., 723
A.2d 976, 982 (N.J. Super. Ct. App. Div. 1998).
The district court found ORP’s conduct immaterial, which is a
fact-finding that we cannot reverse on appeal without a showing of clear error.
See Ryan, 557 F.3d at 1157. Seeing none, we decline to disturb the district
court’s rulings as to materiality.
C. Waiver
Stryker next argues that the district court’s failure to enforce the
non-waiver provision under Section 22 of the SRAs was legal error.
Section 22 states:
The failure at any time of either Party to enforce any provision(s) of this Agreement shall not constitute or be construed as a waiver of the provision(s) or of the right of that Party to subsequently enforce that, or any other provision(s), of this Agreement.
App. vol. 7, at 1488, 1513.
10 Our circuit adopts the same principle that materiality is a state law issue. See, e.g., Elm Ridge Expl. Co., LLC v. Engle, 721 F.3d 1199, 1212 (10th Cir. 2013) (applying New Mexico law); Elec. Distribs., Inc. v. SFR, Inc., 166 F.3d 1074, 1086 (10th Cir. 1999) (applying Colorado law). 25 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 26
The district court made several findings on waiver. First, the court found
that Stapleford’s suspension—one of Stryker’s purported “cause[s]” for
terminating the JSRA—was both “immaterial” and waived because “Stryker
[had] known about Mr. Stapleford’s suspension for months without objecting.”
ORP Surgical, 2022 WL 4298189, at *5. More pointedly, the court perceived
that Stryker’s citing the suspension was merely a “post-hoc legal
justification[]” for its litigation with ORP. Id. Second, the district court
dismissed Stryker’s reference to Stapleford’s “insubordination” as a breach of
the JSRA. Id. The court acknowledged that Petrides and Stapleford were
“abrasive and difficult to work with,” while noting that “Stryker did not
mention insubordination as a cause for termination until litigation began.” Id.
Third, the court was unmoved by Stryker’s contention that ORP’s SegWay sales
breached the TSRA. Regarding the SegWay sales, the court observed that
“Stryker never provided ORP training or inventory” for its own product, despite
ORP’s requests to that effect, and that Stryker had thus “tacit[ly] consent[ed]”
to the sales of a competitor product. Id. at *6.
On appeal, Stryker casts these findings as legal and factual error. To the
extent that Stryker delayed enforcing the JSRA against ORP after Stapleford’s
suspension in November 2018, which Stryker denies, Stryker maintains that the
non-waiver provision preserved its right to enforce the JSRA against ORP in
March 2019. And to the extent that Stryker allowed ORP to sell SegWay
products through “knowledge and tacit consent,” which it also denies, Stryker
26 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 27
alleges that the non-waiver provision kicked in to save that claim as well. Op.
Br. at 42. Stryker recognizes that the SRAs contemplate waiver but clarifies
that the contracts do so “only by a written instrument signed by [Stryker and
ORP].” Stryker Reply Br. at 6 (quoting App. vol. 7, at 1488). And as Stryker
points out, no such agreement was signed here.
Under New Jersey law, “[t]he intent to waive need not be stated
expressly, provided the circumstances clearly show that the party knew of the
right and then abandoned it, either by design or indifference.” Knorr v. Smeal,
836 A.2d 794, 798 (N.J. 2003) (emphasis added); accord Merchs. Indem. Corp.
of N.Y. v. Eggleston, 172 A.2d 206, 216 (N.J. Super. Ct. App. Div. 1961), aff’d,
179 A.2d 505 (N.J. 1962) (stating that waiver may arise from “continu[ed]
indifference to the exercise of [a] right” despite “full knowledge of
circumstances producing [that] right”). As with any contract provision, “the
nonwaiver provision itself . . . is subject to waiver by agreement or conduct
during performance.” 13 Williston on Contracts, § 39:36 (4th ed.); see also
Gray Holdco, Inc. v. Cassady, 654 F.3d 444, 454 (3d Cir. 2011) (concluding
that a party who pursues “extensive litigation inconsistent” with their
contractual right to arbitrate could, indeed, waive the right to arbitration
through that litigious conduct).
Also, in New Jersey, waiver of a contract provision through a party’s
actions—or inactions—is a question of fact, not law. See Shebar v. Sanyo Bus.
Sys. Corp., 544 A.2d 377, 384 (N.J. 1988) (“Questions of waiver . . . are
27 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 28
usually questions of intent, which are factual determinations . . . .”); lafelice ex
rel. Wright v. Arpino, 726 A.2d 275, 278 (N.J. Super. Ct. App. Div. 1999)
(clarifying that “if a fact-finder could reasonably draw either inference,” that is
an inference of “recission or affirmation” of a contract based on a party’s
conduct after a breach, then “the issue is one of fact”); Garden State Bldgs.,
L.P. v. First Fid. Bank, N.A., 702 A.2d 1315, 1322–23 (N.J. Super. Ct. App.
Div. 1997) (providing that waiver may occur by “passive conduct,” and that
“[s]uch waiver is basically a question of intention, and usually a matter for the
trier of fact”).
The district court made a specific fact-finding that Stryker’s stated
reasons for terminating the JSRA were simply “post-hoc legal justifications.”
ORP Surgical, 2022 WL 4298189, at *5. It also found that the SegWay sales
did not cause ORP to breach its obligations under the TSRA, nor did the sales
provide grounds to relieve Stryker from paying the restriction payments.
Accepting these findings as true and applying the governing law, we
perceive no legal error here. New Jersey law allows non-waiver provisions to
be waived the same as any other contract provision. See Cnty. of Camden v.
FCR Camden, LLC, No. A-2324-19, 2021 WL 2879119, at *13 (N.J. Super. Ct.
App. Div. July 9, 2021) (citing 13 Williston on Contracts, § 39:36). And so we
consider whether one of the contracted parties, through its conduct or
indifference, elected “to forego some advantage which that party might have
demanded and insisted on” under the contract. Indagro v. Nilva, No. 07-CV-
28 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 29
3742, 2016 WL 3574330, at *5 (D.N.J. June 30, 2016) (quoting West Jersey
Title & Guar. Co. v. Indus. Tr. Co., 141 A.2d 782, 786 (N.J. 1958)). Here, the
district court found that Stryker was indifferent, which defeats its waiver
argument as a matter of law.
D. Lay Opinion
At trial, Stryker objected to the admission of testimony from one of
ORP’s witnesses, Dr. Tuttle, on the ground that the testimony was undisclosed
expert opinion. ORP countered that Dr. Tuttle was simply testifying to “what he
does for a living” and maintained that the court could hear his testimony as a
lay witness. App. vol. 30, at 5781. The district court denied Stryker’s objection
and admitted the testimony as lay opinion. Stryker reprises its objection on
appeal, contending that the district court legally erred in admitting the
testimony as improper expert opinion “disguised” as lay opinion. Op. Br. at 29.
The Federal Rules of Evidence cover lay-witness testimony in Rule 701:
If a witness is not testifying as an expert, testimony in the form of an opinion is limited to one that is: (a) rationally based on the witness’s perception; (b) helpful to clearly understanding the witness’s testimony or to determining a fact in issue; and (c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702.
Testimony that reflects “technical or specialized knowledge” generally
falls outside the ambit of Rule 701. See James River Ins. Co. v. Rapid Funding,
LLC, 658 F.3d 1207, 1215 (10th Cir. 2011) (“Knowledge derived from previous
professional experience falls squarely within the scope of Rule 702 and thus by
29 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 30
definition outside of Rule 701.” (cleaned up)). But possessing expert
knowledge or training does not automatically disqualify someone as a lay
witness. See Ryan Dev. Co., 711 F.3d at 1170–71 (citing First Annapolis
Bancorp, Inc. v. United States, 72 Fed. Cl. 204, 207 (Fed. Cl. 2006); Teen-Ed,
Inc. v. Kimball Int’l, Inc., 620 F.2d 399, 402–04 (3d Cir. 1980)). Witnesses
with professional expertise may qualify as lay witnesses if their testimony
pertains to personal experience or first-hand knowledge. See, e.g., Ryan Dev.
Co., 711 F.3d at 1170–71 (concluding that an accountant’s testimony was lay
opinion because he used basic arithmetic and personal experience to calculate
lost income and other claims); Weese v. Schukman, 98 F.3d 542, 550 (10th Cir.
1996) (upholding the district court’s admission of a physician’s testimony as
lay opinion where the testimony was helpful and drew from his general
experience as a physician).
Dr. Tuttle testified that he did not consider Stryker’s hip stem and Link’s
hip stem to be competing products. He expressed this opinion based on his
experience as an orthopedic surgeon. He recounted one incident when using
Stryker’s product “basically ruined [a] patient’s life for a year” because the hip
stem caused a fracture that became infected. App. vol. 30, at 5782. Dr. Tuttle
also explained that, though he prefers Link’s hip stem, he knows other surgeons
who prefer different products.
Dr. Tuttle’s testimony is a close call. But we cannot say that the district
court abused its discretion, especially given the “greater leeway” we give the
30 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 31
court to make evidentiary rulings in a bench trial. Att’y Gen. of Okla. v. Tyson
Foods, Inc., 565 F.3d 769, 780 (10th Cir. 2009); cf. Tosco Corp. v. Koch Indus.
Inc., 216 F.3d 886, 896 (10th Cir. 2000) (“[I]n bench trials questions raised
relative to the admission or exclusion of evidence become relatively
unimportant, because the rules of evidence are intended primarily for the
purpose of withdrawing from the jury matter which might improperly sway the
verdict.” (cleaned up)).
Dr. Tuttle’s opinion that the Stryker and Link hip stems were not
competitive was rationally based on his perception that Stryker’s product
harmed patients in certain scenarios. See Fed. R. Evid. 701(a). Dr. Tuttle
testified that some surgeries may require different hip stems based on the
patient’s needs and that surgeons may hold preferences between ostensibly
similar devices, which helped the court determine that Stryker’s and Link’s hip
stems were not interchangeable and thus not competitive. See Fed. R. Evid.
701(b). And Dr. Tuttle’s opinion did not rely on a technical understanding of
each device’s mechanics, but rather reflected his personal frustrations with
Stryker’s product. See Fed. R. Evid. 701(c). So, as with the accountant’s
testimony in Ryan Dev. Co., Dr. Tuttle’s testimony pulled from basic
observations about patients’ individual needs and his personal experiences in
the operating room. See 711 F.3d at 1170; see also James River, 658 F.3d at
1214 (noting that lay opinion covers common observations).
31 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 32
Stryker also mischaracterizes the district court’s ruling in stating that the
court relied “exclusively” on Dr. Tuttle’s testimony. Op. Br. at 29. In fact, the
district court also considered Curtis’s opinion that Link hip stems were
competitive, but simply elected to credit the doctor’s experience over “the
businessman’s opinion of hip-stem interchangeability.” ORP Surgical, 2022
WL 4298189, at *4. Further, Curtis testified that Stryker had an interest in
securing optimal patient outcomes and that “it’s the surgeon’s choice on what
they feel comfortable putting in th[e] patient.” App. vol. 32, at 6135. Viewed
this way, Curtis’s testimony actually supports the conclusion that ORP’s
occasional sale of Link hip stems abided by its agreement with Stryker, which
under Section 6.4 granted ORP the “unfettered right to . . . distribute . . .
products that are not competitive with any of the Products or that do not
conflict with the best interests of [Stryker].” App. vol. 7, at 1477 (emphasis
added).
Thus, the district court did not abuse its discretion in admitting Dr.
Tuttle’s testimony as lay opinion and relying on that opinion, in part, to
conclude that the Link hip stem was not a competitive product.
Having reviewed all of Stryker’s factual and legal issues on appeal
related to the breach-of-contract claims and all counterclaims, we conclude that
the district court did not err. We affirm all findings of fact and conclusions of
law dispensed in the district court’s order and judgment resolving ORP’s
breach-of-contract claims. We also affirm the portion of the order and judgment
32 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 33
requiring Stryker to pay ORP the restriction payments in the amount assessed
by the district court.
We now turn to the matter of indemnification and the award of attorneys’
fees.
III. Attorneys’ Fees
Our task in this appeal is to determine whether the district court erred in
construing the SRAs’ indemnification provision, Section 18, as requiring
Stryker to indemnify ORP for the attorneys’ fees that ORP accrued in litigating
against Stryker. Stryker argues that the court so erred. And due to its erroneous
interpretation, Stryker contends, the district court mistakenly awarded
attorneys’ fees to ORP. For the reasons below, we agree with Stryker. We
reverse the district court’s ruling on the meaning of Section 18 as a matter of
law and vacate the award of attorneys’ fees.
A. Standard of Review “The proper construction of a contract is a question of law we review de
novo.” Penncro Assocs., Inc. v. Sprint Spectrum, L.P., 499 F.3d 1151, 1155
(10th Cir. 2007). Under New Jersey law, which the parties agree controls,
“[i]ndemnity contracts are interpreted in accordance with the rules governing
the construction of contracts generally.” Ramos v. Browning Ferris Indus., 510
A.2d 1152, 1159 (N.J. 1986). These rules dictate that we “enforce the contracts
which the parties themselves have made,” lending all terms their plain and
ordinary meaning. Kampf v. Franklin Life Ins. Co., 161 A.2d 717, 720 (N.J.
33 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 34
1960) (citation omitted); see M.J. Paquet, Inc. v. N.J. Dep’t of Transp., 794
A.2d 141, 152 (N.J. 2002).
B. Section 18 The precise contractual language is paramount to our analysis; and so,
unexpurgated, Section 18 begins:
Each Party shall indemnify, defend, exonerate, and hold the other harmless from and against the other for any and all claims, suits, liability, loss, costs, expenses (including, without limitation, reasonable attorneys’ fees and expenses) or damages of any kind or nature howsoever caused by reason of any injury (whether to body, property, or personal or business character or reputation) sustained by any person or entity or to property by reason of or arising out of or relating to any breach of this Agreement by the indemnifying Party or any act, neglect, default, or omission by the indemnifying Party or by any of its or his agents, employees or other representatives (for the avoidance of doubt, in the case of Stryker Orthopaedics as the indemnifying Party, excluding any act, neglect, default or omission by Representative, any of his affiliates and any of their respective agents, employees or other representatives (including without limitation, the Representative Parties)).
App. vol. 7, at 1487–88, 1512.
Then it continues:
The indemnified Party shall provide prompt written notice to the indemnifying Party of any such suits or claims, provided that the indemnified Party’s delay in providing such notice to the indemnifying Party shall not discharge the indemnifying Party from the indemnification obligations hereunder, except to the extent such delay actually prejudices the indemnifying Party. The indemnifying Party shall undertake and conduct the defense of any such suit and shall keep the indemnified Party apprised of the progress of such suit. The indemnified Party shall be entitled to participate in such suit at its or his own expense, provided, however, if the indemnifying Party fails to defend such suit in a timely manner, the indemnified Party may defend such suit at the indemnifying Party’s expense. The indemnifying Party shall not be entitled to settle, compromise or
34 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 35
otherwise dispose of any such suit or claim without the prior written consent of the indemnified Party, with the exception of settlements solely for monetary damages to be paid by the indemnifying Party.
Id.
The district court found the plain language of this provision to be
“self-contradictory.” App. vol. 5, at 1057. Looking to the parties’ dueling
interpretations of the language, the court decided that ORP’s reading carried
the day. The court agreed with ORP that the “express language . . . provides
attorney’s fees for costs arising out of Stryker’s breach,” despite other language
in the provision that suggests pure application to third parties (i.e., the notice
provision). Id. at 1058.
Much of the debate before the district court centered on the question of
whether first-party indemnification claims—that is, a claim between the
contracted parties—are cognizable under New Jersey law at all. Stryker and
ORP marshaled competing caselaw to convince the district court of their
respective positions. 11 But New Jersey caselaw on first-party indemnity is
11 In the district court and on appeal, Stryker’s argument that New Jersey law forbids first-party indemnification under Section 18 rests primarily on its interpretation of Travelers Indemnity Co. v. Dammann & Co., Inc., a Third Circuit case interpreting New Jersey contract law. 594 F.3d 238 (3d Cir. 2010). Specific to the contract provision before the Third Circuit, the court held that the language could not sustain first-party indemnification because if it did the words “indemnify,” “defend,” and “hold harmless,” would be rendered meaningless. Id. at 255. For the same reason, Stryker argues that Section 18 cannot be read to encompass ORP’s claim for indemnity. ORP counters with another case, CEM Business Solutions, Inc. v. BHI Energy, No. 21-CV-18543, 2022 WL 1017098, at *2–3 (D.N.J. Apr. 4, 2022), (footnote continued) 35 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 36
something of a morass because the New Jersey Supreme Court has yet to rule
on the issue. See Boyle v. Huff, Nos. A-1965-21, A-2046-21, 2023 WL 324796,
at *6 (N.J. Super. Ct. App. Div. Jan. 20, 2023) (“Neither the New Jersey
Supreme Court nor this court has ever held that indemnification provisions will
not apply to first-party claims.”). In this void of authority, what remains is a
hodgepodge of opinions from several courts, offering reasonings and
conclusions as varied as the contracts they interpret. 12 But we needn’t weigh in
on whether New Jersey law generally covers first-party indemnity claims
because we hold that the provision before us does not. 13
According to New Jersey law, we construe an indemnity provision for its
plain and ordinary meaning, the same as we would any other contractual
where the court stated that indemnification provisions under New Jersey law may, and in that case did, apply to first-party suits. 12 Compare Atl. City Assocs., LLC v. Carter & Burgess Consultants, Inc., 453 F. App’x 174, 180 (3d Cir. 2011) (applying New Jersey law), and Invs. Sav. Bank v. Waldo Jersey City, LLC, 12 A.3d 264, 270–71 (N.J. Super. Ct. App. Div. 2011) (opposing first-party indemnity claims), with Boyle, 2023 WL 324796, at *6, and CEM Bus. Sols., Inc., 2022 WL 1017098, at *3 (supporting first-party indemnity claims). 13 In Dammann, the Third Circuit commented that, though “no New Jersey case . . . actually permits an indemnitee to maintain the [first-party indemnification] claim that [the appellant] wishes to assert against [the appellee],” the court could not “hold that first-party indemnification claims . . . are categorically barred as a matter of law in New Jersey absent direct authority to that effect.” 594 F.3d at 255. We recognize that the Third Circuit deliberately cabined its holding in Dammann to leave the door open for future first-party indemnity claims presented under a different set of facts. See id. (declining to implement “a sweeping rule” on first-party indemnification under New Jersey law). With that said, we needn’t opine on the matter further. 36 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 37
provision. See Kieffer v. Best Buy, 14 A.3d 737, 742–43 (N.J. 2011). We take
the language as we find it, not as we wish it were. See Kampf, 161 A.2d at 720;
see also Antonin Scalia & Bryan Garner, Reading Law: The Interpretation of
Legal Texts 174 (2012) (divining that “it is no more the court’s function to
revise by subtraction than by addition”). And given the murky, distended
language laid before us in Section 18, we wade through it cautiously, word by
word.
Holding a microscope up to Section 18, we begin with the designation,
“Each Party,” which everyone seems to agree contemplates the possibility of
either contracted party as the indemnitor. App. vol. 7, at 1487, 1512. The
language then goes on to say that the indemnitor “shall indemnify . . . and hold
the other harmless.” Id. (emphasis added). In this context, “the other” naturally
refers to the party positioned opposite the indemnitor: the indemnitee. And so
Section 18 reads, “[The indemnitor] shall indemnify . . . and hold [the
indemnitee] harmless . . . .” Id. So far so good; Section 18 reads like a standard
indemnification provision. We continue: “[The indemnitor] shall indemnify . . .
and hold [the indemnitee] . . . harmless from and against the other.” Id.
(emphasis added). The second appearance of “the other” is confounding.
Nevertheless, we can infer that this second “the other” must revert back to the
indemnitor. For we know that this time “the other” can’t be the indemnitee—
the indemnitee was just mentioned—therefore “the other” must be some person
other than the indemnitee. But we also know that “the other” can’t be a third
37 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 38
party because “the other” (notably, not “another”) inheres a limited universe
containing only two alternatives—or perhaps two opposing parties. Thus, here,
“the other” must be the indemnitor. With that understanding, Section 18 now
reads, “[The indemnitor] shall indemnify . . . and hold [the indemnitee] . . .
harmless from and against [the indemnitor] for any and all claims . . . .” Id.
In this appeal, Stryker is the purported indemnitor and ORP is the
purported indemnitee. So plugging Stryker and ORP into their assigned roles
inside our newly elucidated version of Section 18, we can comfortably read the
provision to say that “[Stryker] shall indemnify, defend, exonerate, and hold
[ORP] harmless from and against [Stryker] for any and all claims . . .
(including, without limitation, reasonable attorneys’ fees and expenses) . . . .”
Id. Under this refreshed reading, we agree with the district court that the outset
of Section 18 appears to encompass, and even to limit, indemnification to
first-party claims. Id.
But the first line of Section 18 is not the end of the story; and as we
continue reading, our construction of the language diverges from the district
court’s. After the first line, Section 18 proceeds to list the indemnifiable claims
available under the provision, including “any and all claims, suits, liability,
loss, costs, expenses (including, without limitation, reasonable attorneys’ fees
and expenses) or damages of any kind or nature howsoever caused by reason of
any injury (whether to body, property, or personal or business character or
reputation) sustained by any person or entity . . . by reason of . . . any breach of
38 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 39
this Agreement.” Id. (emphasis added). Two things strike us about this
language.
First, instead of calling the injured party, “the indemnified party”—the
label used throughout the rest of Section 18—the provision describes the
injured as “any person or entity.” Had the parties intended Section 18 to
encompass first-party indemnity, we would expect the language to clarify that
the indemnitee is (or at least can be) the one injured. In omitting “the
indemnified party” from the list of the potentially injured persons, Section 18
begins to lean away from first-party indemnification.
Second, the language states that any indemnifiable claim must be
precipitated by an injury as defined by the parenthetical. That is, the obligation
to indemnify under Section 18 is triggered only when the “person or entity”
sustains an injury “to body, property, or personal or business character or
reputation.” Id.
This exhaustive list of potential injuries presents the first major hurdle
for ORP. ORP argues initially that Stryker caused an injury that satisfies
Section 18 because the language employs the broadening term “any” and New
Jersey law recognizes breach of contract as legal injury per se. But these
arguments ignore the enumerated list of injuries recognized by Section 18. The
provision limits the class of injuries sufficient to trigger an indemnifiable claim
as those to “body, property, or personal or business character or reputation.” Id.
Though it may be possible for ORP to have sustained one of these injuries
39 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 40
under a different set of facts, it’s not clear that ORP sustained such an injury
here. The only realistic contender that we can perceive is an injury to ORP’s
property caused by Stryker’s failure to fulfill ORP’s contractual right to receive
the restriction payments. But even so, it’s not at all obvious that Stryker’s
refusal to pay the restriction payments injured ORP’s “property.” ORP carries
the burden to show its entitlement to recover attorneys’ fees under Section 18
and, based on the limited list under Section 18, we conclude that it has failed to
do so. See Green v. Morgan Props., 73 A.3d 478, 492 (N.J. 2013).
The next hurdle for ORP is that the rest of Section 18 overwhelmingly
suggests third-party indemnification. New Jersey law requires that we construe
contract provisions “as a whole.” Dammann, 594 F.3d at 255 (quoting Hardy ex
rel. Dowdell v. Abdul-Matin, 965 A.2d 1165, 1169 (N.J. 2009)). Doing so here,
we deduce that the remaining clauses in Section 18, or the “ancillary clauses”
as Stryker calls them, signal third-party indemnification. Op. Br. at 54.
To start, every ancillary clause addresses the indemnified party’s rights
in “such suits,” meaning the “suits” defined earlier in Section 18. The word
“such” reveals that Section 18 contemplates only one type of suit. And the
substance of the ancillary clauses firmly suggests suits brought by third parties.
The ancillary clauses provide for notice of suit to the indemnitee, progress
updates of the suit to the indemnitee, the indemnitee’s right to participate in the
suit at its own expense, and the indemnitee’s entitlement to give written
consent prior to settlement. Clauses of this sort only make sense in a third-party
40 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 41
context, and other courts have routinely associated these types of clauses with
third-party rights. See, e.g., Pfizer, Inc. v. Stryker Corp., 348 F. Supp. 2d 131,
146 (S.D.N.Y. 2004) (portraying the indemnitee’s right to notice, right to
conduct and control over claims, and right to employ counsel as “rights and
obligations for indemnification for third party claims”); Oscar Gruss & Son,
Inc. v. Hollander, 337 F.3d 186, 199–200 (2d Cir. 2003) (“A finding that the
indemnification clause did not reach suits between the parties was also
supported ‘by other provisions in the contract which unmistakably relate to
third-party claims.’” (quoting Hooper Assocs., Ltd. v. AGS Computs., Inc., 548
N.E.2d 903, 905 (N.Y. 1989))). So reading the provision as a whole, it appears
that the parties intended to limit their indemnity obligations to claims raised by
third parties. See George M Brewster & Son v. Catalytic Constr. Co., 109 A.2d
805, 812 (N.J. 1954) (interpreting the terms of an indemnity provision “as a
whole” to divine “the common understanding” of the parties); see also Millville
Sav. Bank v. Malvern Bank, Nat’l Ass’n, No. 21-CV-13001, 2022 WL 279833,
at *4 (D.N.J. Jan. 31, 2022) (applying Pennsylvania law) (“While the paragraph
that Plaintiff cites is tremendously broad, the Court agrees with Defendant that,
when read in context, it implicitly applies only to third-party
indemnification.”); NAR Bus. Park, LLC v. Ozark Auto. Distribs., LLC, 430
F. Supp. 3d 443, 461 (N.D. Ill. 2019) (“A contract may implicitly limit
indemnification to third parties, however, if it contains language inconsistent
with first-party indemnification.”).
41 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 42
So after trudging through Section 18, we are left with introductory
language suggesting that an odd first-party indemnity coverage is in play, but
also with ancillary clauses talismanic of third-party indemnification. When
faced with at least two reasonable yet opposing interpretations of a contract,
New Jersey law instructs that we find the language ambiguous. See M.J. Paquet
Inc., 794 A.2d at 152 (“An ambiguity in a contract exists if the terms of the
contract are susceptible to at least two reasonable alternative interpretations.”
(cleaned up)). So we find Section 18 ambiguous and interpret the ambiguity
according to typical canons of contract construction. 14 Kieffer, 14 A.3d at
742–43 (“The objective in construing a contractual indemnity provision is the
same as in construing any other part of a contract . . . .”).
Turning to the canons, in New Jersey, courts must construe ambiguous
indemnification provisions against the indemnitee. Id. at 743; Litton Indus.,
Inc. v. IMO Indus., Inc., 982 A.2d 420, 427–28 (N.J. 2009). With this
preference in mind, we are compelled to construe the provision against
indemnification, and therefore against ORP. On that basis, we vacate the award
of reasonable attorneys’ fees granted to ORP. Because ORP cannot recover any
14 All the typical canons apply, except that, contrary to New Jersey’s convention to construe ambiguity against the drafter, Roach v. BM Motoring, LLC, 155 A.3d 985, 991 (N.J. 2017), we will not automatically construe the ambiguity against Stryker because of the SRAs’ Section 28: “The Parties acknowledge that this Agreement is the result of negotiations so neither Party shall avail itself of any rule of construction that would resolve ambiguities against a drafting party.” App. vol. 7, at 1489, 1514. 42 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 43
fees under Section 18, Stryker’s remaining challenges to specific categories of
ORP’s fees are moot.
Yet we acknowledge the district court’s caveat that if the SRAs had not
required Stryker to pay ORP attorneys’ fees, then the court “would likely have
ordered defendant to reimburse plaintiffs for the attorney’s fees and costs
plaintiff incurred during the discovery process.” ORP Surgical, 2022 WL
4298189, at *14. Owing deference to the district court’s “inherent powers” to
manage discovery, we remand this case to the district court to determine and
order sanctions if the court sees fit. See Chambers v. NASCO, Inc., 501 U.S. 32,
45–46 (1991) (reviewing the circumstances in which “federal courts have
inherent power to assess attorney’s fees against counsel,” including “when a
party has acted in bad faith,” specifically “by delaying or disrupting the
litigation” (cleaned up)).
IV. ORP’s Cross-Appeal
On cross-appeal, ORP raises a single claim: the district court erred in
awarding nominal damages for Stryker’s breach of the non-solicitation/non-
diversion provision. We affirm the district court.
The party seeking damages bears the burden of proof. Caldwell v.
Haynes, 643 A.2d 564, 571 (N.J. 1994). We give “considerable deference” to
the damages assessed by the trier of fact, especially when damages are
uncertain. Maul v. Kirkman, 637 A.2d 928, 939 (N.J. Super. Ct. App. Div.
43 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 44
1994) (citing Baxter v. Fairmont Food Co., 379 A.2d 225, 229–230 (N.J.
1977)).
B. Nominal Damages
The district court found that Stryker solicited and diverted ORP reps in
breach of the TSRA. But shifting gears from liability to damages, the court
struggled to measure the damages owed to ORP from Stryker’s breach. The
assessment of damages was the sticking point for the district court and is the
source of ORP’s cross-appeal.
At trial, the district court asked ORP to articulate the “economic
consequence” of Stryker’s solicitation and diversion. App. vol. 33, at 6570.
ORP’s expert had offered a couple of theories, and Stryker’s expert took a stab
as well. But ultimately, the court felt that “[n]either party provided anything
useful,” and discerned nothing from the record from which it could measure the
damages ORP incurred from Stryker’s solicitation and diversion. ORP Surgical,
2022 WL 4298189, at *10.
Principally, the court found “insufficient evidence” that Stryker’s tactics
actually caused ORP’s reps to resign and accept positions at Stryker. Id. at *11.
In reaching this determination, the court recognized that Petrides’s termination
of the TSRA deprived the reps of most of their income opportunities. The court
noted that much of the reps’ training and expertise was particular to Stryker’s
products, which the reps could no longer sell. So naturally, the court concluded,
those reps sought positions in-house with Stryker after the TSRA terminated.
44 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 45
The court’s finding that Stryker’s actions were not the but-for cause of
the ORP reps jumping ship stymied its ability to measure compensatory
damages. Compensatory damages contemplate the position the nonbreaching
party would have been in but for the breach, but here the court determined that
the reps would have left even without Stryker’s breach. So the court concluded
that compensatory damages were inapt to remedy ORP’s injury. And even if
compensatory damages had been on the table, the court wasn’t convinced by
any of ORP’s damages proposals. Finding that ORP failed to carry its burden in
proving damages, the court instead awarded nominal damages, which is the
prescribed alternate remedy under New Jersey law. See Salt Lake Trib. Publ’g
Co., LLC v. Mgmt. Plan., Inc., 454 F.3d 1128, 1141 (10th Cir. 2006)
(“Whenever there is a breach of contract, the law ordinarily infers that damages
ensued, and, in the absence of actual damages, the law vindicates the right by
awarding nominal damages.” (cleaned up)).
ORP challenges the district court’s nominal damages award and argues
for compensatory damages. But from the jump, Stryker asserts that ORP waived
this argument by neglecting to preserve it in its Rule 59(e) post-judgment
motion.
We pause to consider preservation and Rule 59(e).
Under Rule 59(e), a party may move the court “to alter or amend a
judgment” within 28 days after the entry of judgment. Fed. R. Civ. P. 59(e). A
Rule 59(e) motion “is appropriate where the court has misapprehended the
45 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 46
facts, a party’s position, or the controlling law.” Servants of Paraclete v. Does,
204 F.3d 1005, 1012 (10th Cir. 2000). When a party raises one of these
challenges, the motion preserves that issue for appellate review. AdvantEdge
Bus. Grp. v. Thomas E. Mestmaker & Assocs., Inc., 552 F.3d 1233, 1238 (10th
Cir. 2009); cf. Elm Ridge Expl. Co., LLC v. Engle, 721 F.3d 1199, 1219 (10th
Cir. 2013) (deciding that a Rule 59(e) motion could preserve issues for appeal
where the appellant neglected to renew its motion for judgment as a matter of
law).
ORP’s Rule 59(e) motion raised two issues for the district court to
reconsider: (1) the sanctions order for Special Master’s fees, and (2) damages
for soliciting and diverting Demorset in breach of the JSRA. The first issue is
not relevant to ORP’s cross-appeal.
On the second issue, ORP attempted to distinguish Demorset’s hiring
from the other ORP reps Stryker hired. For the other reps, ORP acquiesced to
the district court’s reasoning that “only nominal damages should be awarded”
because ORP lacked sufficient evidence to show Stryker caused those reps to
leave. App. vol. 2, at 367. ORP parroted the court’s judgment that ORP’s
terminating the TSRA “left the sales reps without the ability to continue to sell
Stryker products,” and thus that the reps’ seeking jobs at Stryker was
inevitable. Id. at 368 (citation omitted). ORP then used that segment of the
district court’s judgment as a springboard for its argument that Demorset’s
hiring was different; specifically, ORP alleged that “this reasoning does not
46 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 47
apply” to Demorset. Id. at 360. According to ORP, Demorset presented a
different case because Stryker hired him in breach of the JSRA, which Stryker
terminated. And so, ORP moved the court to reconsider awarding actual
damages for Stryker’s diverting Demorset, which flowed solely from Stryker’s
breach, unlike the other hirings that were caused at least partly by ORP’s own
actions.
Before us, ORP changes tack and contends that nominal damages were an
inadequate remedy for Stryker’s diversion of the other reps, without mentioning
Demorset at all. This is not the argument ORP made in its Rule 59(e) motion.
In the post-judgment motion, not only did ORP not challenge the nominal
damages remedy, but it accepted the district court’s reasoning—the same
reasoning that ORP now claims to constitute legal error. This dissonance
between ORP’s 59(e) arguments and its appellate arguments supports Stryker’s
position that the nominal damages issue is not properly before us on appeal. See
Little v. Budd Co., Inc., 955 F.3d 816, 821 (10th Cir. 2020) (noting that
arguments waived for appeal include “a new theory on appeal that falls under
the same general category as an argument presented at trial” (citation omitted)).
“Our preservation rules are part of the ‘winnowing process’ of litigation
that permits a court to ‘narrow what remains to be decided.’” United States v.
Walker, 918 F.3d 1134, 1151 (10th Cir. 2019) (quoting Exxon Shipping Co. v.
Baker, 554 U.S. 471, 487 n.6 (2008)). In doing so, we strongly disfavor parties’
attempts to use this court as “a second-shot forum” for mounting theories
47 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 48
unexplored in the district court. Fish v. Kobach, 840 F.3d 710, 730 (10th Cir.
2016) (cleaned up). That said, we retain discretion to reach the merits of any
unpreserved issue. Johnson v. Spencer, 950 F.3d 680, 707 (10th Cir. 2020).
Throughout the proceedings in district court, ORP advocated for
compensatory damages in recovery for Stryker’s solicitation and diversion of
its sales reps. ORP offered multiple theories on how to calculate these damages,
which the court heard and considered. See Niemi v. Lasshofer, 770 F.3d 1331,
1346 (10th Cir. 2014) (“It is a general rule that a federal appellate court will
not consider an issue which was not presented to, considered or decided by the
trial court.” (citation omitted)). Stryker, too, had the opportunity to present its
own evidence and countervailing calculations for ORP’s loss, which weighs in
favor of us hearing ORP’s unpreserved damages claim. See Lyons v. Jefferson
Bank & Tr., 994 F.2d 716, 720 (10th Cir. 1993) (stressing that parties should
have “the opportunity to offer all the evidence that they believe relevant to the
issues” and “present whatever legal arguments [they] may have” before the
issues proceed on appeal (citation omitted)). Further, we confine our analysis to
the legal sufficiency of nominal damages as the remedy for ORP’s injury, not
the amount of damages as a matter of fact. See Stahmann Farms, Inc. v. United
States, 624 F.2d 958, 961 (10th Cir. 1980) (recognizing that preservation
principles are “relaxed somewhat where the question is one of law”). So even
though ORP fumbled the ball under Rule 59(e), we address the legal merits of
ORP’s cross-appeal.
48 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 49
Moving to the merits, ORP alleges that (1) the district court erred in
determining that Stryker’s solicitations did not cause ORP’s reps to leave;
(2) the court misconstrued the contractual terms “divert,” “hire,” and “poach”;
and (3) the court wrongly rejected two valid calculations for compensatory
damages, which led to an inadequate remedy in the form of nominal damages.
For the reasons stated above, we limit our analysis to the legal questions
presented on cross-appeal. To that end, we review de novo ORP’s claims under
New Jersey law. See Black & Veatch Corp. v. Aspen Ins. (Uk) Ltd., 882 F.3d
952, 957 (10th Cir. 2018).
At the outset, we accept as true the district court’s finding that Stryker’s
solicitation and diversion tactics did not cause the ORP reps to resign and
accept jobs at Stryker. 15 Relatedly, the court concluded that “Stryker did not
breach the contract by poaching ORP reps, it broke the contract by soliciting
and diverting” them. ORP Surgical, 2022 WL 4298189, at *10. ORP asserts
that this constituted legal error because in distinguishing between “divert[ing]”
and “poach[ing]” the court misapprehended the contractual language. Answer
Br. at 74. And further, ORP accuses the district court of denying damages
15 ORP casts its first argument on cross-appeal as a legal issue, when truly it challenges the district court’s factual findings. As we’ve addressed already, ORP’s preservation of the issues on cross-appeal is tenuous at best. What’s more, in its Rule 59(e) motion, ORP accepted the district court’s finding that Stryker’s tactics were not the cause of ORP’s sales reps leaving. So we decline to second guess the district court’s findings on this point.
49 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 50
because they were “difficult to quantify,” which ORP contends was likewise
legal error. 16 Id. at 76.
Reviewing the disputed language with “fresh eyes,” we don’t perceive
how the district court misconstrued the SRAs’ language. Kieffer, 14 A.3d at
742. But more importantly, we struggle to see why it matters. ORP argues that
in rejecting Stryker’s poaching as the source of its damages, the court
mistakenly disregarded the “economic impact” of Stryker hiring the ORP reps.
Answer Br. at 75 (quoting App. vol. 5, at 1089). Put differently, ORP posits
that had the district court correctly construed the meaning of “diverting,” ORP
would have received its desired damages award. That is not how we read the
district court’s decision.
16 ORP relies on Wolpaw v. General Accident Insurance Co., 639 A.2d 338 (N.J. Super. Ct. App. Div. 1994), in asserting that New Jersey law obligated the district court to “fashion a remedy” even when damages were uncertain. Resp. Br. at 76; ORP Reply Br. at 14. But Wolpaw is distinguishable. There, the court tolerated an inexact damages calculation because the uncertainty of the amount stemmed directly from the breach. Wolpaw, 639 A.2d at 341 (“[W]here the breach itself destroys the injured party’s ability to prove damages with exactitude, the proof may be inexact.”). The court observed that the plaintiff’s damages could not “even be approximated” because, in that case, assessing damages would have required the plaintiff “to prove the outcome of a trial that never occurred.” Id. Unlike Wolpaw, Stryker’s breach did not prevent ORP from calculating its damages. ORP did calculate damages, under three separate theories, two of which it reargues on appeal—one amount for $4.7 million and another for $907,000. The court simply rejected these theories due to various logical and factual flaws. Thus, the court didn’t shun any obligation to fashion a remedy, ORP failed to meet its burden to prove damages by a preponderance of the evidence. See Caldwell, 643 A.2d at 571. 50 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 51
The court found it indisputable that Stryker solicited and diverted ORP
employees and thus breached the contract. Having established liability, what
mattered next was ORP’s ability to state coherently the economic consequence
of that breach. But on that score, ORP came up short. ORP’s damages expert
offered three alternative theories for awarding damages—fair market value, lost
profits, and disgorgement—and the court rejected all of them. And more
specifically as to each theory, the court found that the proposed amounts were
either derived from flawed factual assumptions or otherwise unsupported by the
evidence. So the court did not reject compensatory damages based on a
divergent understanding of the words diverting or poaching or even based on
the difficulty in calculating damages. Rather, the court declined to award
compensatory damages because ORP failed to carry its burden in proving the
economic consequence of Stryker’s breach. And so, finding that its hands were
tied, the court looked to governing New Jersey law and concluded that nominal
damages provided an adequate substitute remedy.
This case comes to us from an especially complex, fact-bound bench
trial. Particularly on damages, the court heard voluminous testimony from
ORP’s and Stryker’s expert witnesses. We recognize that the trial judge
occupied the prime seat to evaluate this evidence, along with its “‘intangibles’
. . . e.g., credibility, demeanor, feel of the case,” from which to assess the
damages amount—a factual question under New Jersey law. Dombroski v. City
of Atl. City, 706 A.2d 242, 246 (N.J. Super. Ct. App. Div. 1998) (citations
51 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 52
omitted); see Baxter, 379 A.2d at 229–30. And the court’s coming up empty on
compensatory damages due to insufficient facts, is itself a fact-finding that we
will not disturb on appeal. See Baxter, 379 A.2d at 230 (prescribing “corrective
judicial action” on damages awarded by the trier of fact “only upon the
predicate . . . that there has been a manifest miscarriage of justice”). The only
remaining question for us is whether the district court erred when it concluded
that nominal damages were an adequate substitute remedy for Stryker’s breach
of the non-solicitation/non-diversion provision.
In New Jersey, “[a]ctual damages . . . refers to the real losses flowing
from” the breaching party’s conduct. W.J.A. v. D.A., 43 A.3d 1148, 1154 (N.J.
2012). Taking the district court’s factual conclusions as we find them, we
ascertain that ORP has failed to prove the real losses that flowed from Stryker’s
solicitation and diversion of the reps. Yet ORP indisputably suffered a breach,
and so we infer that damages ensued. See Nappe v. Anschelewitz, Barr, Ansell
& Bonello, 477 A.2d 1224, 1228 (N.J. 1984). When a nonbreaching party “has
not proved a compensable loss,” New Jersey law holds that “[n]ominal damages
serve the purpose of vindicating” the party’s legal rights. Graphnet, Inc. v.
Retarus, Inc., 269 A.3d 413, 422 (N.J. 2022) (cleaned up).
ORP alleges that the district court barred relief when it awarded nominal
damages. But in New Jersey, nominal damages are a “legal remedy.” Id. So
ORP got relief, just not the relief it wanted. After reviewing ORP’s claims on
cross-appeal and canvassing the trial record, we discern no error—legal or
52 Appellate Case: 22-1430 Document: 010110995568 Date Filed: 02/06/2024 Page: 53
factual—committed by the district court. The award of nominal damages for
Stryker’s breach of the non-solicitation/non-diversion provision is affirmed.
CONCLUSION
For the reasons stated, we affirm in part and reverse in part. The case is
remanded for further proceedings in accordance with this opinion.
Related
Cite This Page — Counsel Stack
92 F.4th 896, Counsel Stack Legal Research, https://law.counselstack.com/opinion/orp-surgical-v-howmedica-osteonics-corp-ca10-2024.