United States District Court, D. Colorado
OPINION AND ORDER GRANTING MOTION FOR SUMMARY JUDGMENT
Marcia S. Krieger Chief United States District Judge
THIS MATTER comes before the Court pursuant to the Defendants’ Motion for Summary Judgment (# 400), the Plaintiff’s response (# 408), and the Defendants’ reply (# 415). Also before the Court are: 1) the parties’ Joint Motion (# 288) for determination of the admissibility of the expert opinions of Dr. Samuel Chewning, which the parties agreed (# 367) to have the Court resolve on the papers; 2) the Defendants’ Objections (# 390) to the Magistrate Judge’s July 20, 2015 Recommendation (# 378) that the Plaintiff’s Motion to Strike (# 296) the Defendants’ Amended Answer (# 87) be granted and that the Defendants’ Motion for Leave to Amend their Answer (# 324) be denied, and the Plaintiff’s response to those Objections (# 395); 3) the Defendants’ Motion in Limine (# 383), and the Plaintiff’s response (# 405); 4) the Plaintiff’s Motion To Strike Expert Reports and Exclude Trial Testimony of Three Spine Surgeon Witnesses (# 389), the Defendants’ response (# 406), and the Plaintiff’s reply (# 413); and 5) the Defendants’ Motion for Leave to Restrict Access (# 399) to certain exhibits attached to the Defendants’ summary judgment motion and a corresponding motion (# 409) by the Plaintiffs relating to the Plaintiff’s response thereto.
This case presents a long and complex factual scenario, both substantively and procedurally. The following consists of only the most cursory summary, and the Court elaborates as necessary in its analysis of each motion.
1. The Parties
Plaintiff, Lenox-Maclaren Surgical Corporation (“Lenox”), is a manufacturer of surgical bone mills. In this action, it contends that the Defendants engaged in a lengthy, complex, and coordinated campaign to force Lenox out of the bone mill market, allowing the Defendants to successfully introduce and market a competing bone mill. According to Lenox, the campaign was ultimately successful, allowing the Defendants to monopolize the bone mill market for several years.
The four named Defendants here are each members of a complex corporate structure. Lenox elides the various corporate identities of the Defendants by routinely referring to them, individually or collectively, under the undifferentiated name “Medtronic.” For reasons that will become clear below, the Court declines to follow that lead; instead, the Court will attempt to scrupulously distinguish among the Defendants and identify with precision the role that each plays in the events at issue.
Defendant Medtronic, Inc. appears to be the overarching corporate parent, with Defendant Medtronic Sofamor Danek, Inc. (“MSD”) as one of its subsidiaries. MSD, in turn, has at least two corporate subsidiaries of its own, Defendant Medtronic Sofamor Danek Co. Ltd. (“Med Japan”) and non-party Medtronic Sofamor Danek USA (“Med USA”). Defendant Medtronic PS Medical, Inc.’s place in the corporate family tree is unclear, although it has some relationship to Medtronic, Inc. For the most part, neither party has come forward with any particularized evidence of the Defendant entities’ stock ownership, corporate officers, membership of boards of directors, or decision-making practices.
2. The Alleged Campaign
In 2000, Lenox manufactured and sold a hand-cranked “bone mill” (sometimes called a “bone fragmenter” or “grinder”), a tool used by surgeons performing bone fusion operations to grind a patient’s bone material into fragments. Although the genesis of the arrangement is disputed, it is uncontroverted that in 2000, Lenox and Med USA entered into a multi-year contract (the “distribution agreement” or simply “the agreement”). The terms of the agreement granted Med USA an exclusive license to purchase bone mills from Lenox, re-brand them with Med USA’s name (or, perhaps, with the name “Medtronic”), and distribute them. The agreement called for Med USA to make an initial purchase of 500 Lenox bone mills in the first year, followed by specific minimum purchase requirements in subsequent years. Med USA made the initial purchase of 500 mills in the first year of the agreement, but did not purchase any mills in subsequent years. The failure to make the minimum purchases entitled Lenox to terminate Med USA’s exclusive license, although it is not clear when (or if) Lenox did so. Lenox contends that this was the first step in the alleged campaign.
Shortly after purchasing the initial batch of Lenox bone mills, Med USA distributed some of the mills to hospitals under a “loaner program.” The loaner program allowed hospitals to use the bone mills without charge, rather than purchase them. Lenox contends that the loaner program was a calculated act (and the second step in the Defendants’ overall scheme), designed by the Defendants to stimulate demand for bone mills among hospitals and surgeons who were previously using less-effective equipment and techniques, but to prevent the hospitals from obtaining permanent ownership of a durable tool that would not need immediate replacement. This, argues Lenox, allowed the Defendants to cultivate and preserve a customer base for the purchase of bone mills, but delay such purchases until such time as they introduced their own competing product.
It is at this juncture, that corporate identities among the Defendants become important. It appears to be undisputed that Med USA was the initial purchaser of the Lenox bone mills and made the decision to loan, rather than sell, the mills. But, as discussed below, Lenox’s claims here are not (and cannot be) brought against Med USA. In this action, Lenox is attempting to show that the decision to create or implement the loaner program was made by all or some of the Defendants herein, either independently or in conjunction with Med USA. Unfortunately, Lenox never clearly explains which other Defendants jointly made these decisions with Med USA or otherwise. Instead, Lenox uses the undifferentiated label “Medtronic” to describe all of the Defendants (and occasionally Med USA), obscuring any contention as to the actions of any particular Defendant(s). The only specific contention that the Court ascertains is Lenox’s contention that Defendant Med Japan facilitated the loaner program alongside Med USA.
The third (and most pivotal) step in the alleged campaign occurred in or about 2006. Med USA claimed to receive complaints from three Japanese doctors using the Lenox bone mill. The complaints allegedly asserted that the bone mills malfunctioned during use, leaving metal shavings in the ground bone. Med USA contacted Lenox about the complaints and Lenox conducted an investigation. Lenox ultimately concluded that it could not substantiate the complaints and posited that the appearance of shavings resulted from misuse of the bone mill. (Lenox now contends that the complaints were simply fabricated by, or at the direction of, the Defendants.) Med USA requested that Lenox initiate a recall of the bone mills, but Lenox refused. In October 2006, Med USA initiated its own recall of the bone mills. Lenox contends this recall was improper, and intended to stigmatize Lenox and destroy its reputation in the market.
Once again, the Court pauses to differentiate between the Defendants. Lenox contends that the recall was a premeditated act by “Medtronic” as part of its campaign to eliminate Lenox as a competitor. However, in the arbitration action against Med USA, Lenox argued, and the arbitrators determined, that the recall was initiated by Med USA. In this action, Lenox must show that one or more specific Defendants here had culpable involvement with the decision to recall the bone mills, but, as noted earlier, Lenox generically alleges acts by the undifferentiated “Medtronic.” As the discussion herein explains, the Court understands Lenox to assert that Med USA’s corporate parents, MSD and Medtronic, Inc., participated in that decision.
Defendant PS Medical introduced its own bone mill product (sometimes called “the Midas Rex”) in 2007. Lenox contends that, having tarnished Lenox’s reputation via the recall and while preserving customer demand via the loaner program, the Defendants were able to quickly dominate the bone mill market, securing nearly 100% of that market by 2007 and retaining nearly 66% of the market through at least 2010.
3. Arbitration of Claims against Med USA
In 2007, Lenox brought claims against Med USA, alleging that Med USA entered into the distribution agreement, engaged in the loaner program, and initiated the recall, all for the purpose of dominating the bone mill market with Med USA’s “own” bone mill. Specifically, Lenox asserted claims for patent infringement, violation of the Colorado Consumer Protection Act, and trade libel. Per the terms of the distribution agreement, Lenox’s claims against Med USA were submitted to arbitration.
After a full arbitration hearing (on slightly different claims than those Lenox initially asserted), the arbitration panel found that: (i) Med USA’s loaner program did not breach the parties’ contract; (ii) Med USA’s production of the Midas Rex bone mill did not breach the parties’ contract; (iii) Med USA’s (allegedly inadequate) promotional efforts on behalf of the Lenox bone mill did not violate the covenant of good faith and fair dealing; (iv) the loaner program did not create “contributory infringement” of Lenox’s patent because the “first sale” doctrine allowed Med USA to freely use the bone mills it had purchased; (v) Med USA’s recall of the bone mills was improper and premature (given that Lenox was undertaking efforts to resolve the alleged defects), constituting an intentional interference with Lenox’s prospective business relations; and (vi) Med USA was liable to Lenox for $246, 000 in damages, plus prejudgment interest.
4. The Current Lawsuit
In 2010, Lenox revised its theories and commenced the instant suit. Lenox’s new theory abandons its prior contentions that Med USA was the primary actor, and instead asserts that the various Defendants herein engaged in anticompetitive conduct that allowed “Medtronic” to attempt and subsequently create a monopoly in the bone mill market, in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. Lenox’s contentions in this action allege the same unlawful acts - a campaign to obtain the right to distribute Lenox bone mills, to suppress purchase demand via the loaner program, to harm Lenox’s reputation by initiating the recall, and then to satisfy the now-cleared market with the Midas Rex bone mill- but Lenox now asserts those contentions against new Defendants.
Early in this litigation, Senior Judge Matsch granted summary judgment to the Defendants on Lenox’s monopolization claims. He found that: (i) Lenox’s narrow definition of the relevant product market, which covered only mechanical bone mills (of which Lenox was then the only provider), was improper, and that the proper market definition should include surgical hand tools such as rongeurs, scissors, and forceps; (ii) Lenox could not show that the Defendants obtained monopoly power in the market for a sufficient period of time, as competitors such as Stryker and DePuy quickly entered the market with their own bone mills; and (iii) Lenox demonstrated only injury to itself, not to competition generally, and that the exclusionary effect caused by the recall was neutralized by April 2007, when the FDA terminated the recall.
Lenox appealed that order, and the Tenth Circuit reversed, addressing the following: (i) as to the Defendants’ newly-raised argument that the arbitration proceeding precluded Lenox from litigating the current claims on res judicata grounds, the Tenth Circuit found that whether the Defendants were in privity with Med USA for preclusion purposes is a factual issue and the Defendants’ failure to raise that argument at summary judgment prevented Lenox from coming forward with evidence on that point; (ii) as to the relevant product market, there was a factual question of whether inexpensive hand tools and expensive bone mills are part of the same market; (iii) that the Defendants’ possession of 97% of the bone mill market in 2007 and 62% of that market as late as 2010, coupled with evidence of various barriers to enter that market, was sufficient to permit a finding that the Defendants had monopoly power; (iv) that Lenox adduced sufficient evidence that the Defendants’ efforts during the recall constituted a type of trade disparagement sufficient to amount to exclusionary conduct for monopolization purposes; (v) although the Defendants challenged Lenox’s ability to rely on the recall without naming Med USA as a party herein (and on the grounds that none of the named Defendants participated in initiating the recall), the Tenth Circuit found that this issue fell outside the scope of the discovery permitted by the District Court prior to the summary judgment proceedings, and thus, declined to reach it; (vi) that a prior ruling by the Tenth Circuit,  affirming the District Court’s denial of a motion by the Defendants seeking to compel Lenox to arbitrate the monopolization claims did not operate to require proof of cooperation between non-party Med USA and the Defendants to sustain Lenox’s current claims; (vii) that Lenox came forward with adequate evidence of harm to competition by showing that, from 2007 to 2010, the Defendants were able to charge “supracompetitive prices” and that sales of bone mills from competitors (other than Stryker) remained insubstantial; and (viii) that by showing sufficient evidence to support an actual monopolization claim, Lenox adduced sufficient evidence to support its attempted monopolization claim as well. Lenox MacLaren Surgical Corp. v. Medtronic, Inc., 762 F.3d 1114 (10th Cir. 2014).
5. Pending issues
The Tenth Circuit remanded the case and it was reassigned to the undersigned. The parties engaged in additional discovery and the Court granted the Defendants leave to file a second summary judgment motion directed at then-unaddressed aspects of the case. In that motion (# 400), the Defendants raise the following arguments: (i) that Lenox cannot prove anticompetitive conduct by any individual Defendant and that all of the conduct forming the basis of Lenox’s monopoly claims are actions taken solely by non-party Med USA; (ii) that Lenox’s monopolization claims are untimely, as the claims accrued at the time the alleged anticompetitive acts began, namely, the signing of the distribution agreement in 2000, and the four-year statute of limitations thus expired in 2004, long before commencement of this case in 2010; (iii) that the Defendants are entitled to judgment in their favor on their affirmative defense under the Noerr-Pennington doctrine, as the alleged anticompetitive conduct - most significantly, initiating the recall - was action directed at petitioning the Government (via the FDA) to take action; (iv) that the Defendants are entitled to judgment in their favor on their affirmative defense of res judicata, insofar as Lenox’s claims against these Defendants necessarily require Lenox to take the position that the Defendants are in privity with Med USA, and thus, the Defendants are entitled to claim res judicata effect for claims that Lenox could, but did not, bring against Med USA during the prior arbitration proceedings; and (v) for similar reasons, the Defendants are entitled to summary judgment in their favor on their affirmative defense of arbitration and award.
Also pending are several additional motions that the Court will not summarize here but will briefly address in its analysis.
A. Motion for Summary ...