United States District Court, E.D. Wisconsin
HEALTHWERKS, INC., SPINE GROUP OF WISCONSIN, LLC, GREAT LAKES SPINE GROUP, LLC, and PAUL R. BREITENBACH, Plaintiffs,
HOWMEDICA OSTEONICS CORP. d/b/a STRYKER SPINE, Defendant, and BIOMET SPINE, LLC, Involuntary Plaintiff,
MIKE ROGERS, SCOTT OLIN, DAN GRAY, JOHN MURRAY, NICK NOVAK, ANNIE BRAUER, and TODD POTOKAR, Third-Party Defendants.
GRANTING BIOMET'S MOTION FOR SUMMARY JUDGMENT (DKT. NO.
100); DENYING STRYKER'S MOTION FOR SUMMARY JUDGMENT (DKT.
NO. 112); GRANTING IN PART AND DENYING IN PART THE
PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT (DKT. NO. 120);
AND GRANTING THE SALES REPRESENTATIVES' MOTION FOR
SUMMARY JUDGMENT (DKT. NO. 121)
PAMELA PEPPER UNITED STATES DISTRICT JUDGE
the court are several motions for summary judgment filed by
(1) the plaintiffs (Healthwerks, Inc., Spine Group of
Wisconsin, LLC, Great Lakes Spine Group, LLC, Paul R.
Breitenback) with one of the third party defendants (Todd
Potokar), (2) the involuntary plaintiff, Biomet Spine, LLC,
(“Biomet”), (3) the defendant, Howmedica
Osteonics Corp. d/b/a Stryker Spine (“Stryker”),
and (4) the rest of the third party defendants (Mike Rogers,
Scott Olin, Dan Gray, John Murray, Nick Novak and Annie
Brauer) (collectively “the sales
representatives”). In the main, the parties dispute the
extended enforceability of the last written contract between
“Spine Group” (consisting of Spine Group of
Wisconsin, LLC, Great Lakes Spine Group, LLC, and Paul
Breitenbach) and Stryker. Dkt. No. 140 at 1. After reviewing
the pending motions, briefs, proposed facts, and relevant
law, the court will grant in part the motion filed by Spine
Group, Healthwerks, and third-party defendant Potokar. Dkt.
No. 120. The court will deny Stryker's motion. Dkt. No.
112. The court will grant Biomet's motion. Dkt. No. 100.
Finally, the court will grant the sales representatives'
motion. Dkt. No. 121. In sum, the court will dismiss Counts
I, II, III, IV, V, VII, VIII, IX, and X of the amended
counterclaim. The court will grant summary judgment in favor
of the plaintiffs on Count I of the amended complaint. The
court will allow the parties to proceed to trial on Count VI
of the amended counterclaim and Count II of the amended
RELEVANT UNDISPUTED FACTS
Summary Of The Facts
and Biomet compete against each other in the spine-related
instrument and implant market. Stryker Spine's Civil L.R.
56 Proposed Material Facts In Support of Motion For Summary
Judgment, Dkt. No. 114 at ¶1. Both companies manufacture
and sell spinal instruments and implant products.
Id. In 2005, Stryker granted Spine Group the
exclusive right to distribute its products in Wisconsin and
Northern Michigan. Id. at ¶6. Spine Group
employed the third party defendants-Mike Rogers, Scott Olin,
Dan Gray, John Murray, Nick Novak and Annie Brauer-to act as
sales representatives for the products. Id. at
¶17. Spine Group failed, however, to execute sales
representative agreements (“SRAs”) with Brauer
and Murray. Id. at ¶¶17-18. In 2010, Todd
Potokar started working with Spine Group. ¶31.
January 2008, the parties reaffirmed their relationship based
on terms similar to those in the 2005 agreement, but through
two separate agency agreements (“the 2008
agreements”). Id. at ¶8. When the 2008
agreements expired, Spine Group continued to distribute
Stryker's products while the parties negotiated a new
agreement. Id. at ¶59; Plaintiffs' and
Third-Party Defendants' Proposed Material Facts in
Support of Their Motions For Summary Judgment, Dkt. No. 138
at ¶¶14, 15, 53. Biomet proposed a contract during
the same time period. Dkt. No. 114 at ¶114. The
plaintiffs filed the complaint in this case after Spine Group
and Healthwerks entered into a contract with Biomet, rather
than with Stryker. Id. ¶114.
Stryker's Contract With Spine Group
other things, the 2008 agreements contained prohibitions on
disclosing confidential information, a non-compete provision
ending one year after termination of the agreements,
obligations requiring Spine Group to procure SRAs with
express language, and obligations requiring both parties to
follow set procedures upon termination. Id. at
¶¶9, 12, 14-16, 59.
2008 agreements started with an “Initial Term”
encompassing a one-year period, which automatically extended
for two years-until December 31, 2010-because Spine Group met
its performance quotas. Id. at ¶34. Stryker
could extend the Initial Term only if it notified Spine Group
“in writing not less than sixty (60) days prior to the
last day of the Initial Term that it desires to extend this
Agreement.” Dkt. No. 138 at ¶15.
December 9, 2010, instead of extending the existing
agreements, Stryker sent a revised renewal agreement to Spine
Group. Dkt. No. 114 at ¶36. Spine Group did not sign
that agreement, and the 2008 agreements terminated on
December 31, 2010. Id. at ¶36; Biomet Spine,
LLC's proposed material facts in support of its motion
for summary judgment Dkt. No. 102 at ¶17. Termination
triggered the availability of the one year non-compete and
termination procedures, but neither party initiated the
procedures. Dkt. No. 114 at ¶¶12, 59. Instead, the
parties continued to negotiate. Dkt. No. 138 at ¶53.
Negotiations Between Spine Group And Stryker
August 2013, two and a half years into negotiations, Stryker
and Spine Group still had “major contract
concerns.” Id. at ¶53. At this point,
Stryker proposed an extension agreement retroactively
changing the termination date of the 2008 agreements, but
Spine Group did not sign. Dkt. No. 102 at ¶¶23, 26.
The parties met again in September to negotiate, but no
contract resulted. Dkt. No. 114 at ¶121. In December,
the parties scheduled telephone conferences to discuss the
contract, and Stryker sent a revised agency agreement on
January 6, 2014. Id. at ¶¶123, 124, 127,
but see Dkt. No. 163 at 55 (Spine Group disputes
that the conferences actually happened). Despite not having a
contract, Spine Group continued to sell Stryker products and
maintain the business relationship. See e.g. id. at
¶125 (On December 20, 2013, Breitenbach asked his
assistant to register him and a few representatives for
Stryker's national sales meeting, set to begin on January
16, 2014); Id. at ¶128 (Potokar left a
voicemail, on January 6, 2014, for one of Stryker's sales
leaders, stating that he called to go through the 2014
January 14, 2014, Spine Group informed Stryker that it was
terminating their relationship. Id. at ¶132.
Stryker sent a reminder email to Spine Group concerning its
ongoing obligations, including the one year non-compete.
Id. at ¶134.
Negotiations Between Biomet And Spine Group
2013, there was minimal overlap between Biomet's and
Stryker's customers in the region served by Spine Group.
Id. at ¶74. In early 2013, during the same
period that Stryker and Spine Group were negotiating, Spine
Group and Biomet began meeting to discuss a new partnership
and to assess Spine Group's obligations to Stryker.
Id. at ¶¶75, 95; Dkt. No. 102 at ¶31;
Dkt. No. 138 at ¶53. On May 13, 2013, Potokar proposed
merging Spine Group with another company, called Healthwerks,
which would become Biomet's distributor. Dkt. NO. 102 at
Group negotiated terms with Biomet throughout much of 2013.
Id. at ¶37. On June 27, 2013, Spine Group
provided Biomet with signed copies of the 2008 agreements.
Dkt. No. 114 at ¶95. Biomet and Spine Group entered into
a mutual non-disclosure agreement on July 16, 2013,
id. at ¶88, and outside counsel exchanged
emails concerning restrictions on disclosing confidential
materials in September of 2013, id. at ¶101.
December 12 and 13, 2013, the sales representatives signed
SRAs with Biomet. Id. at ¶¶112-13. On
December 26, 2013, Spine Group, Healthwerks, and Biomet
executed an exclusive SRA, effective January 1, 2014 (later
amended to January 14, 2014). Id. at ¶114; Dkt.
No. 102 at ¶38. Finally, Biomet, Healthwerks, and Spine
Group executed an indemnity agreement in the event that
Stryker decided to sue. Dkt. No. 114 at ¶116.
became Biomet's distributor on January 14, 2014. Dkt. No.
102 at ¶40.
January 15, 2014, Healthwerks and Spine Group filed a
complaint in state court, seeking a declaratory judgment that
the 2008 agreements no longer were enforceable. Dkt. No. 1-1.
Stryker removed the case to this court on January 28, 2014.
Dkt. No. 1. On February 27, 2014, the parties filed a joint
submission substantiating jurisdiction. Dkt. No. 19. On
September 26, 2014, Stryker filed an answer, counterclaims,
and a third party complaint. Dkt. No. 40.
court resolved two motions to dismiss and a prior summary
judgment motion. Dkt. No. 39; Dkt. No. 81.
15, 2015, the plaintiffs filed an amended complaint, Dkt. No.
86, and Stryker filed an amended counterclaim and third-party
complaint, Dkt. No. 87. Biomet filed its summary judgment
motion on October 13, 2015, Dkt. No. 100. On November 16,
2015, Stryker (Dkt. No. 112), Spine Group, Healthwerks and
Potokar (collectively “the plaintiffs”) (Dkt. No.
120); and the sales representatives (Dkt. No. 121) filed
their motions for summary judgment. All counts of the amended
complaint, amended counterclaim and third party complaint are
at issue. The court will address each count in turn.
SUMMARY JUDGMENT STANDARD
must grant summary judgment when “there is no genuine
dispute as to any material fact and the moving party is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). Material facts are those “facts that might
affect the outcome of the suit under the governing law,
” and a dispute about a material fact is genuine if a
reasonable jury could find in favor of the nonmoving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
determining whether summary judgment is appropriate, the
court views all facts and draws all reasonable inferences in
favor of the nonmoving party. Herzog v. Graphic Packaging
Int'l, Inc., 742 F.3d 802, 806 (7th Cir. 2014). But,
if the court “cannot resolve the conflict between these
two positions without deciding which side to believe, ”
summary judgment is not appropriate. Wolf v. Buss
(America) Inc., 77 F.3d 914, 922 (7th Cir. 1996)(quoting
Sarsha v. Sears, Roebuck & Co., 3 F.3d 1035,
1041(7th Cir. 1993)). Credibility determinations and choosing
between competing inferences is a jury function. Id.
that said, “inferences that are supported by only
speculation or conjecture will not defeat a summary judgment
motion.” Herzog, 742 F.3d at 806 (quoting
Tubergen v. St. Vincent Hosp. & Health Care Ctr.,
Inc., 517 F.3d 470, 473 (7th Cir. 2008)). The opposing
party cannot simply rely on allegations or denials in its
pleadings; it must also “introduce affidavits or other
evidence setting forth specific facts showing a genuine issue
for trial.” Anders v. Waste Mgm't of Wis.,
463 F.3d 670, 675 (7th Cir. 2006). “[A] party will be
successful in opposing summary judgment only when that party
presents definite, competent evidence to rebut the
motion.” EEOC v. Sears, Roebuck & Co., 233
F.3d 432, 437 (7th Cir. 2000)(quoting Smith v.
Severn, 129 F.3d 419, 427 (7th Cir. 1997)). Thus, a
court appropriately grants summary judgment “against a
party who fails to make a showing sufficient to establish the
existence of an element essential to that party's case,
and on which that party will bear the burden of proof at
trial.” Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986).
CHOICE OF LAW ANALYSIS
2008 agreements contain a New Jersey choice of law provision.
Dkt. No. 87 at ¶ 44. Because the parties dispute whether
New Jersey or Wisconsin law governs the claims arising out of
the 2008 agreements, the court must start with a
choice-of-law analysis. Dkt. No. 158 at 7; See
Auto-Owners Ins. Co. v. Websolv Computing, Inc., 580
F.3d 543, 547 (7th Cir. 2009) (quoting Wood v. Mid-Valley
Inc., 942 F.2d 425, 427 (7th Cir. 1991))(“Courts
do not worry about conflict of laws unless the parties
disagree on which state's law applies.”).
a district court's jurisdiction is based on diversity . .
. the court must follow the choice of law rules of the forum
state to determine the applicable substantive law.”
Progressive N. Ins. Co. v. Mick White Renovations,
No. 04 C 7465, 2007 WL 899398, at *2 (N.D. Ill. Mar. 16,
2007)(citations omitted). Under Wisconsin choice of law
principles, a contractual choice of law provision is
enforceable only if it does not contravene important state
law public policies that would apply if the contract did not
contain a choice of law provision. Drinkwater v. Am.
Family Mut. Ins. Co., 714 N.W.2d 568, 573-574 (Wis.
2006). Essentially, courts determine (1) the presumptive
state law if no choice of law provision existed and (2)
whether enforcing the forum clause in the contract would
contravene important public polices of the presumptive state.
absence of a choice-of-law provision, “the law of the
forum should presumptively apply unless it becomes clear that
nonforum contacts are of the greater significance.”
Id. at 575-76 (quoting State Farm Mut. Auto.
Ins. Co. v. Gillette, 641 N.W.2d 662, 676 (Wis. 2002)).
Wisconsin courts apply the “grouping of contacts”
rule to determine the state with which the contract has its
most significant relationship. State Farm Mut. Auto. Ins.
Co., 641 N.W.2d at 671 (citing Haines v. Mid-Century
Ins. Co., 177 N.W.2d 328 (1970)). “Relevant
contacts include:  place of contracting;  the place of
negotiation of the contract;  the place of performance;
 the location of the subject matter of the contract; and
 the respective domiciles, places of incorporation and
places of business of the parties.” Sybron
Transition Corp. v. Sec. Ins. Co. of Hartford, 107 F.3d
1250, 1255 (7th Cir. 1997)(quoting Hystro Prods., Inc. v.
MNP Corp., 18 F.3d 1384, 1387 (7th Cir. 1994)). The
quality of the contacts determines which contacts are
significant. Sybron Transition Corp., 107 F.3d at
2008 agreements have the most significant relationship with
Wisconsin. Spine Group distributed Stryker products in
Wisconsin and Michigan. Dkt. No. 114 at ¶6. The
collective parties referred to in this decision as
“Spine Group” are Wisconsin companies and
residents. Dkt. No. 138 at ¶1; Dkt. No. 19 at ¶1-3.
The only ties these contracts had to New Jersey were the fact
that Stryker is a New Jersey corporation and the fact that
the contracts provide a New Jersey choice of law provision.
Dkt. No. 87 at ¶1, 44. Because the contract covers
product sales in Wisconsin with Wisconsin companies and
residents, it follows that Wisconsin law should
on to the second step, applying New Jersey law would
contravene Wisconsin public policy. Wisconsin has a strong
public policy invalidating any covenant imposing an
unreasonable restraint on employment. Wis.Stat. §
103.465. The purpose of this law is to encourage mobility of
workers. See, e.g. Farm Credit Servs. of N. Cent. Wis.,
ACA v. Wysocki, 627 N.W.2d 444, 447 (Wis. 2001)(citing
Gary Van Zeeland Talent, Inc v. Sandas, 267 N.W.2d
242 (1978)). Wisconsin courts will not enforce a provision
that imposes an unreasonable restraint, “even as to any
part of the covenant or performance that would be a
reasonable restraint.” Wis.Stat. §103.465. New
Jersey has a similar standard requiring reasonable covenants,
but, in contrast to Wisconsin courts, if a New Jersey court
finds a clause to be unenforceable, “rather than deem
the covenant void ab initio, [c]ourts will enforce them to
the extent reasonable under the circumstances.”
Richards Mfg. Co. v. Thomas & Betts Corp., No.
CIV. 01-4677, 2005 WL 2373413, at *4 (D.N.J. Sept. 27, 2005).
then, requires the employer to craft, at the outset,
covenants which contain only such restrictions are reasonably
necessary; if the employer includes unreasonable
restrictions, the entire covenant is unenforceable. New
Jersey, in contrast, will not deem the entire covenant
unenforceable if it contains unreasonable restrictions.
Rather, New Jersey law encourages courts to try to partially
enforce the covenants if they can do so “without injury
to the public and without injustice to the parties.”
Id. If this court were to apply New Jersey law, it
would contravene Wisconsin's stronger public policy
against unreasonable restraints. The court concludes that
Wisconsin law governs this dispute.
ANALYSIS OF CLAIMS
Stryker Does Not Have A Breach Of Contract Claim Against
Spine Group Or The Sales Associates.
Count I of the amended counterclaim, Stryker alleges that
Spine Group breached several provisions of the 2008
agreements. Dkt. No. 87 at ¶116. In Count VIII of the
amended counterclaim, Stryker alleges that the sales
representatives breached the sales representative agreements.
Id. at ¶219.
direct contrast, the plaintiffs as, in Count I of the amended
complaint, that the court find that the 2008 agreements were
no longer enforceable after January 1, 2012; in other words,
they ask the court to find that there were no contracts in
place with Stryker that they could have breached. Dkt. No. 86
Wisconsin law, a plaintiff must demonstrate three elements in
order to prove a breach of contract claim: (1) that a valid
contract existed (2) that the defendant breached that
contract and (3) that damages flowed from that breach.
Matthews v. Wisconsin Energy Corp., 534 F.3d 547,
553 (7th Cir. 2008) (citing Nw. Motor Car, Inc. v.
Pope, 187 N.W.2d 200 (Wis. 1971)).
The First Element (Existence of a Valid Contract): Spine
Group and Stryker did not have a valid contract after
December 31, 2010.
Group does not dispute the existence of the 2008 agreements
or their terms. Dkt. 140 at 5. The parties dispute only
whether any of the terms extended beyond December 31, 2011.
Id. at 5.
The 2008 agreements expired on December 31, 2010.
2008 agreements terminated under an express provision
requiring Stryker to extend the agreements, in writing, no
less than sixty days prior to the last day of the initial
term. Dkt. No. 138 at ¶15. Instead of extending the
terms in writing, Stryker sent a revised renewal agreement
which Spine Group did not execute. Dtk. No. 114 at ¶36.
Because Stryker did not extend the agreements and because the
parties failed to enter into a new contract, the 2008
agreements terminated on December 31, 2010, by their own
terms. Dkt. No. 102 at ¶17. As a result, the one year
non-compete restriction lapsed on December 31, 2011. Dkt. No.
138 at ¶14-15.
The only provisions in the 2008 agreements which extended
beyond December 31, 2011-the ...