Turner v. Johnson & Johnson

688 F. Supp. 806, 1988 U.S. Dist. LEXIS 9570, 1988 WL 77314
CourtDistrict Court, D. Massachusetts
DecidedJuly 11, 1988
DocketCiv. A. No. 79-2259-S
StatusPublished
Cited by1 cases

This text of 688 F. Supp. 806 (Turner v. Johnson & Johnson) is published on Counsel Stack Legal Research, covering District Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Turner v. Johnson & Johnson, 688 F. Supp. 806, 1988 U.S. Dist. LEXIS 9570, 1988 WL 77314 (D. Mass. 1988).

Opinion

ORDER ON MOTION FOR SUMMARY JUDGMENT

SKINNER, District Judge.

This action was originally tried before another district judge on a complaint alleging breach of contract, fraud and violation of M.G.L. c. 93A in the purchase by the defendant Johnson & Johnson (“the defendant”) of the plaintiffs’ business, American Medical Electronics Corporation (“AMEC”), which manufactured an electronic clinical thermometer called Meditemp. A judgment for the plaintiffs on several claims of fraud was reversed by the court of appeals, Turner v. Johnson & Johnson, 809 F.2d 90 (1st Cir.1986), and the case remanded for a new trial on but one of the claims of common law fraud. The court of appeals suggested, however, that it had seriously considered ordering the dismissal of the entire case, that it doubted that the plaintiff would prevail at a new trial, and that the district court should consider the resolution of the matter by motion for summary judgment.

The defendant has responded to the court’s suggestion, and its motion for summary judgment is before me. The initial task is to determine what issues the court of appeals has left open for decision on this motion. Further, the motion for summary judgment must be considered in the light of standards for the entry of summary judgment recently announced by the Supreme Court. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The history leading to this litigation is set forth with admirable clarity in the opinion of the court of appeals. 809 F.2d at 92-94. The critical part of the case may be briefly summarized. The plaintiffs’ product, rights to which were acquired by the defendant, was an electronic clinical thermometer, superior to competing products because of its handy size and ease of use. It also was equipped with a timer, which enabled a nurse using the thermometer to take the patient’s pulse without looking at a watch. This device was automatically activated when the thermometer probe was used, and emitted a signal after thirty seconds had elapsed. The attendant circuitry was patented.

Coincidentally with its negotiations with the plaintiffs, the defendant was also negotiating to purchase the rights to a competing thermometer called the Survalent, which also had a timing device. At the time of closing with the plaintiffs, defendant had acquired an option to purchase the Survalent but it did not exercise the option until eighteen months later. Prior to the closing, the defendant had learned of an overlap between the Meditemp patent and the Survalent patent application but deliberately did not inform plaintiffs of the conflict. Ultimately, litigation in the patent office established the priority of the Meditemp patent, but this outcome was not certain at the time of the closing. In addition to the facts stated by the court of appeals, [808]*808it now appears as an uncontradicted fact that there were several other electronic thermometers on the market at the time which also were equipped with pulse timers. However, the IVAC thermometer, which was by far the dominant product in the field, did not have a pulse counting feature at that time.

The alleged fraudulent misrepresentation consists of nondisclosure. The defendant was obliged to disclose its interest in any other thermometer at the closing with plaintiffs. At the last minute, the defendant’s executive, Hartman, disclosed the defendant’s interest in the Survalent, describing it as an “IVAC type thermometer,” i.e., a large, relatively awkward device, but failing to mention the pulse counting feature. He added, “Don’t worry about it.”

There is conflicting evidence as to whether describing the Survalent as an IVAC type thermometer without mentioning the timer was adequate disclosure. The court of appeals ruled that a jury could find that the omission was material. 809 F.2d at 98-9. The plaintiffs have testified that they would not have gone through with the sale if they had known of Survalent’s pulse counting feature. While I personally do not find this statement credible in the light of subsequent events, this testimony, in addition to the considerations voiced by the court of appeals, creates a jury issue.

The court of appeals expressed considerable doubt concerning the sufficiency of the plaintiffs' evidence of fraudulent intent. 809 F.2d at 99. The court resolved the issue from its point of view as follows:

[W]e think a reasonable jury conceivably could have found that Johnson & Johnson defrauded plaintiffs into selling their business at an unfair price so that Johnson & Johnson would be able to control the marketing of these potentially competing products. [Emphasis supplied]
Notwithstanding our reluctance to take this case from the jury on this point, we would urge the district court on remand to consider Johnson & Johnson’s argument on motive and, if Johnson & Johnson can rebut through affidavits our theory and any other proposed motive offered by the plaintiffs, it should consider, if filed, a renewed motion for summary judgment.

In the absence of positive evidence of fraudulent intent, if the factual context makes an inference of fraud economically implausible, then the plaintiffs must come forward with more persuasive evidence to support their claim than would otherwise be necessary. Matsushita Electrical Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. at 574, 106 S.Ct. at 1349-50. The court of appeals’ use of the word “conceivably” may not accurately reflect the standard to be applied in view of Matsushita and Anderson v. Liberty Lobby, Inc., 477 U.S. at 252, 106 S.Ct. at 2512.

In my opinion, the defendant has presented uncontradicted evidence sufficient to rebut the theory offered by the court of appeals. In the first place, it is by no means established that the selling price for the plaintiffs’ company was unfair, given its serious financial condition. More importantly, however, there is uncontradicted evidence that several other competing thermometers had pulse counting features. Acquisition by the defendant of both Meditemp and Survalent would not have permitted the defendant to control the market insofar as the pulse timer was concerned. In this context, it is clear to me that the differences between Meditemp and Survalent in size and configuration were far more significant for competitive purposes than was the pulse counting feature.

Defendant, moreover, has made what is to me a telling point on the issue of the economic implausibility of a fraudulent intent, namely that under the contract the plaintiffs would have been entitled to royalties on sales of Survalent probes as well as on the sale of Meditemp probes if the Survalent was covered by the plaintiffs’ patent.1 Of course, at the time the overlap of the patents was known to the defendant, but the ultimate validity of the Meditemp had not been established. Either way, however, it would have seemed to be to the [809]*809economic advantage of the defendant to disclose the full situation.

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Related

Turner (Robert B.) v. Johnson & Johnson
879 F.2d 852 (First Circuit, 1989)

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Bluebook (online)
688 F. Supp. 806, 1988 U.S. Dist. LEXIS 9570, 1988 WL 77314, Counsel Stack Legal Research, https://law.counselstack.com/opinion/turner-v-johnson-johnson-mad-1988.