Stability Solutions, LLC v. Medacta USA, Inc.

CourtDistrict Court, N.D. California
DecidedJanuary 20, 2023
Docket3:22-cv-07412
StatusUnknown

This text of Stability Solutions, LLC v. Medacta USA, Inc. (Stability Solutions, LLC v. Medacta USA, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Stability Solutions, LLC v. Medacta USA, Inc., (N.D. Cal. 2023).

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 San Francisco Division 11 STABILITY SOLUTIONS, LLC, Case No. 22-cv-07412-LB

12 Plaintiff, ORDER GRANTING MOTION TO 13 v. TRANSFER VENUE

14 MEDACTA USA, INC., Re: ECF No. 5 15 Defendant. 16 17 INTRODUCTION 18 This is a contract dispute between a medical-device sales agent and a medical-device 19 manufacturer. The plaintiff and its sole owner, Ash Shaalan, entered into an independent-sales- 20 agent agreement with the defendant manufacturer Medacta in April 2021 for the plaintiff to sell 21 the defendant’s joint-replacement implants in the Bay Area for two years. The agreement had 22 sales-volume requirements and provided that if the plaintiff did not meet them, the defendant 23 could terminate the agreement if it first gave the plaintiff notice and an opportunity to cure the 24 default. But in July 2022, the defendant allegedly terminated the agreement without notice or an 25 opportunity to cure. The plaintiff sued for breach of contract, among other claims.1 26 27 1 Compl. – ECF No. 1-1 at 3–16. Citations refer to material in the Electronic Case File (ECF); pinpoint 1 Invoking the agreement’s forum-selection clause, the defendant moved to dismiss for improper 2 venue under Federal Rule of Civil Procedure 12(b)(3) and alternatively moved to transfer venue to 3 the Middle District of Tennessee under 28 U.S.C. § 1404(a).2 The plaintiff contends mainly that 4 the forum-selection clause, especially in combination with the Delaware choice-of-law clause, is 5 unenforceable because it waives the plaintiff’s rights under California’s Independent Wholesale 6 Sales Representative Act, Cal. Civ. Code § 1738.13(e).3 The court denies the motion to dismiss 7 because venue is proper in this removed case. But the court grants the motion to transfer venue 8 because the forum-selection clause is enforceable and the plaintiff has not carried its burden to 9 show that transfer is inappropriate under § 1404(a). 10 11 STATEMENT 12 The plaintiff is a Wyoming company that “sell[s] implantable medical devices and 13 instrumentation to orthopedic surgeons.” The defendant is a Delaware company that 14 “manufactur[es] implantable medical devices and instruments for joint replacements.” Both parties 15 do business in California.4 16 Starting in January 2021, the defendant recruited the plaintiff to help expand the defendant’s 17 customer base in the Bay Area.5 In April 2021, the parties entered into their independent sales 18 agent agreement. It allegedly was partly in writing, partly oral, and partly implied by conduct.6 It 19 appointed the plaintiff as the defendant’s “independent outside sales representative, tasked with 20 selling and marketing [the defendant’s] medical devices and instrumentation . . . to hospitals, 21 medical centers, and physicians in California.”7 22 23

24 2 Mot. – ECF No. 5. 25 3 Opp’n – ECF No. 12. 26 4 Compl. – ECF No. 1-1 at 4 (¶¶ 1–4), 5 (¶¶ 7–8). 5 Id. at 5 (¶ 9). 27 6 Id. (¶ 10); Agreement, Ex. 1 to Hancock Decl. – ECF No. 17-1 at 4–22. 1 The written agreement required the plaintiff to meet a “minimum sales volume” of $2 million 2 in the first year. It provided that if the plaintiff did not meet this target or seventy-five percent of 3 the applicable volume for two consecutive quarters, the defendant could limit the plaintiff’s sales 4 territories or terminate the agreement “upon notice and an opportunity to cure.”8 The cure process 5 had four steps: the defendant provides notice; the plaintiff submits a written improvement plan; 6 the defendant accepts, modifies, or rejects the plan; and the defendant gives the plaintiff an 7 opportunity to cure the default.9 The agreement also had a forum-selection clause (under which all 8 actions “arising out of or relating to” the agreement must be brought in the United States District 9 Court for the Middle District of Tennessee) and a Delaware choice-of-law clause.10 10 The plaintiff alleges that when the agreement was entered into, the defendant’s Area Director 11 and Vice President of Sales “assured [Mr.] Shalaan that the Minimum Sales Volume number was 12 only a ‘soft goal’” and that the plaintiff would not actually be required to achieve the minimum. 13 They “emphasized that the Minimum Sales Volume number was not realistic” for the first year 14 and that “any growth” Mr. Shalaan could achieve would be sufficient, because the defendant “had 15 failed to penetrate the Bay Area market for years.” And they acknowledged that the plaintiff 16 would need “significant support” to successfully recruit customers.11 17 From April 2021 until December 2021, the plaintiff hired three independent-contractor sales 18 representatives and “steadily increased the amount of [the defendant’s] sales and the number of 19 surgeons using [the defendant’s] products in the Bay Area.” During this time, the defendant 20 provided the plaintiff with support, such as by coordinating mobile labs for surgeons and 21 participating in sales calls.12 But in December 2021, after replacing its Area Director, the defendant 22 allegedly stopped providing support and started ignoring Mr. Shalaan’s calls and emails. Without 23

24 8 Id. at 5–6 (¶¶ 12–13); Agreement, Ex. 1 to Hancock Decl. – ECF No. 17-1 at 4–5 (§ 1.2), 14–15 (§§ 9.2, 9.2.5), 21 (Ex. B). 25 9 Compl. – ECF No. 1-1 at 6 (¶ 14); Agreement, Ex. 1 to Hancock Decl. – ECF No. 17-1 at 15 26 (§ 9.2.5). 10 Agreement, Ex. 1 to Hancock Decl. – ECF No. 17-1 at 18 (§ 13.13), 19 (§ 13.14). 27 11 Compl. – ECF No. 1-1 at 7 (¶ 17). 1 Mr. Shalaan’s knowledge, the new Area Director began meeting with the plaintiff’s previously 2 recruited customers and independent-contractor sales representatives. In April 2022, the defendant 3 “unilaterally and in bad faith” increased the plaintiff’s sales quotas for the second year of the 4 agreement. Then, in July 2022, the defendant terminated the agreement based on the plaintiff’s not 5 reaching the minimum sales volume during the agreement’s first year. The defendant did not first 6 provide notice of default or otherwise follow the “opportunity to cure” process.13 7 After terminating the agreement, the defendant allegedly hired the plaintiff’s outside sales 8 representatives as permanent employees. It also continued to deal with the surgeons the plaintiff 9 recruited, including by entering into royalty agreements with them for new implants developed by 10 the defendant with their assistance.14 11 There are seven claims, numbered as follows: (1) violation of California’s Independent 12 Wholesale Sales Representative Act, Cal. Civ. Code §§ 1738.10–.17; (2) breach of contract; (3) 13 breach of the implied covenant of good faith and fair dealing; (4) unjust enrichment; (5) quantum 14 meruit; (6) equitable accounting; and (7) violation of California’s Unfair Competition Law, Cal. 15 Bus. & Prof. Code § 17200.15 16 The plaintiff filed the complaint in the San Francisco County Superior Court and the defendant 17 removed the case to this court.16 It is undisputed that the court has diversity jurisdiction under 28 18 U.S.C. § 1332.17 All parties consented to magistrate-judge jurisdiction under 28 U.S.C. § 636.18 19 The court held a hearing on January 19, 2023. 20 21 22 23 24 13 Compl. – ECF No. 1-1 at 8–9 (¶¶ 21–23, 25–26); First Amendment to Agreement, Ex. 2 to Hancock Decl. – ECF No. 17-1 at 24–25. 25 14 Compl. – ECF No. 1-1 at 9 (¶¶ 27–28). 26 15 Id.

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Bluebook (online)
Stability Solutions, LLC v. Medacta USA, Inc., Counsel Stack Legal Research, https://law.counselstack.com/opinion/stability-solutions-llc-v-medacta-usa-inc-cand-2023.