United States District Court, N.D. Georgia, Atlanta Division
Gerald R. Schell, M.D., Plaintiff,
Amendia, Inc., Defendant.
OPINION & ORDER
MICHAEL L. BROWN UNITED STATES DISTRICT JUDGE.
Gerald R. Schell, M.D., claims Defendant Amendia, Inc.,
failed to pay royalties under several contracts to develop
medical devices. (Dkt. 1.) Schell sued Amendia for breaching
three different agreements, to obtain reimbursement for
services and expenses, for a declaratory judgment, and for an
accounting. (Id.) Amendia moved to dismiss various
claims. (Dkt. 15.) The Court grants that motion in part and
denies it in part.
Background and Procedural History
is a neurosurgeon and spine surgeon who possesses expertise
in spinal implant devices and procedures. (Dkt. 1
¶¶ 1, 6, 8.) Amendia manufactures and sells these
kinds of devices. (Id. ¶ 7.) The two
collaborated to design and develop various devices, including
a pedicle screw system, a facet screw system, and spinal
interbody fusion implants. (Id. ¶ 9.) They
entered into royalty agreements in 2009, 2010, and 2011 to
assure Schell received compensation for his assistance.
(Dkts. 1 ¶ 10; 6 at 4-25.)
2009 agreement governed their collaboration on the SPARTAN S3
facet Screw System, SPARTAN Facet Rasp, and MIS PEEK
Interbody Device (“MIS PEEK”) (collectively
“SPARTAN”), and any next generation designs.
(Dkt. 1 ¶ 11.) Amendia agreed to pay Schell a different
royalty for each product, including most relevantly a 3.5%
royalty on sales of the MIS PEEK device. (Id. ¶
12.) The agreement gives Schell the right to audit
Amendia's finances in order to assure he received
accurate royalty payments. (Dkt. 6 at 6.) Amendia retained
all intellectual property and patent rights in the product.
(Id. at 6-7.) But if Amendia materially breached the
agreement by failing to pay royalty fees or to perform other
material obligations, Schell had the right to use the patent
rights, engineering material, and FDA information. (Dkt. 1
¶ 15.) Amendia also agreed to reimburse Schell for any
damages, costs, or expenses of any nature he incurred as a
result of operating Amendia's business. (Id.
¶ 16.) Amendia further agreed to procure, maintain, and
present Schell a certificate of coverage for at least $5
million in product liability insurance when it began selling
SPARTAN products. (Id.)
parties entered into a second agreement in July 2010.
(Id. ¶ 20; Dkt. 6 at 13.) It was much like the
earlier agreement. It involved that development of a medical
device known as the Polyetheretherketone (“PEEK”)
Oblique Lumbar Interbody Fusion Device (“OLIF”).
(Dkt. 6 at 13.) Amendia agreed to pay Schell a royalty of 2%
of its gross sales of that device. (Dkt. 1 ¶ 21.) Schell
claims the OLIF device was one type of MIS PEEK device that
was part of the 2009 agreement. (Id. ¶ 23.) The
2010 agreement contained a merger clause, saying that it
supersedes and replaces all previous agreements “with
respect to the subject matter hereof.” (Dkt. 6 at 17.)
Even so, Schell claims the 2010 agreement did not nullify the
2009 agreement, requiring Amendia to pay him a royalty of
5.5% of all OLIF device sales - 3.5% for the 2009 agreement
and 2% for the 2010 agreement. (Dkt. 1 ¶ 24.)
parties entered into a third agreement in March 2011 for the
development of something known as Savannah T pedicle screw
system. (Id. ¶ 32; Dkt. 6 at 20.) Amendia
agreed to pay Schell royalties of 2% of the net sales of the
Savannah T system during the term of the agreement. (Dkt. 1
¶ 26.) Georgia law governs each agreement. (Dkt. 6 at 9,
claims that he did everything to fulfill his side of the
agreements. He claims he met with Amendia's employees,
engineers, and representatives several times to consult on
the SPARTAN, OLIF, and Savannah T products. (Dkt. 1 ¶
40.) He claims they observed his surgeries. (Id.) He
claims he traveled throughout the United States from 2009 to
2014 to meet with and teach other surgeons how to use
Amendia's products. (Id. ¶ 41.) Schell also
alleges that he travelled to conduct promotional and
educational activities in 2013 and 2014 for the product,
incurring $38, 663.50 in expenses that Amendia has not
reimbursed. (Id. ¶ 43.)
sued Amendia in July 2017. (Dkt. 1.) Amendia moved to dismiss
Counts One, Two, Five, and Six for failure to state a claim.
(Dkt. 15.) Schell opposed that motion. (Dkt. 19.)
Standard of Review
Rule of Civil Procedure 8(a)(2) requires that a pleading
contain a “short and plain statement of the claim
showing that the pleader is entitled to relief.” Under
Rule 12(b)(6), a claim will be dismissed for failure to state
a claim upon which relief can be granted if it does not plead
“enough facts to state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 547 (2007).
considering a motion to dismiss, the court must accept all
well-pleaded facts in the complaint as true and draw all
reasonable inferences in favor of the plaintiff, the
non-movant. See Garfield v. NDC Health Corp., 466
F.3d 1255, 1261 (11th Cir. 2006). But the court need not
accept as true any legal conclusions couched as factual
allegations. See Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citing Twombly, 550 U.S. at 555). The
court's “duty to accept the facts in the complaint
as true does not require [the court] to ignore specific
factual details of the pleading in favor of general or
conclusory allegations.” Griffin Indus., Inc. v.
Irwin, 496 F.3d 1189, 1205-06 (11th Cir. 2007).
“district court generally must convert a motion to
dismiss into a motion for summary judgment if it considers
materials outside the complaint.” Day v.
Taylor, 400 F.3d 1272, 1275-76 (11th Cir. 2005); see
also Fed. R. Civ. P. 12(d). But a court may consider
exhibits attached to the complaint. See Fed. R. Civ.
P. 10(c). And the exhibits a plaintiff attaches to its
complaint governs when they contradict the allegations of the
complaint. See Griffin Indus., Inc., 496 F.3d at
1206. A district court may also consider documents referenced
in the complaint, even if they are not physically attached,
if the documents are central to the complaint and no party
questions their authenticity. See Day, 400 F.3d at
1276. A document is central to a complaint when it is a
“necessary part of [the plaintiff's] effort to make
out a claim.” Id.; see also Bryant v.
Citigroup Inc., 512 Fed.Appx. 994, 995 (11th Cir. 2013)
(“Although ordinarily nothing beyond the face of the
complaint and the attached documents are considered in
analyzing a motion to dismiss, [courts] make an exception
where the plaintiff refers to a document in his complaint, it
is central to his claim, the contents are not disputed, and
the defendant attaches it to his motion to dismiss.”).
Under those circumstances, the district court may consider
the documents without converting the motion to dismiss into a
motion for summary judgment. See Day, 400 F.3d at
Breach of Contract Claims
Count One, Schell alleges Amendia materially breached the
2009 agreement. (Dkt. 1 ¶ 46-50.) He claims they did
this by failing to pay the necessary royalties for MIS PEEK
devices other than the OLIF device and by failing to pay
complete royalties for the OLIF device after the second
quarter of 2010 (when the parties entered into the 2010
agreement). He claims Amendia also breach the 2009 agreement
by failing to fulfill its other obligations under the
contract (like its obligation to obtain the required
insurance and to reimburse Schell for certain expenses).
(Id.) In Count Two, Schell also claims Amendia
breached the 2010 agreement by failing to pay complete
royalties on the OLIF device after July 2010. He also claims
Amendia breach the 2010 agreement by failing to fulfill its
establish a breach of contract claim under Georgia law,
Schell must allege: “(1) breach and the (2) resultant
damages (3) to the party who has the right to complain about
the contract being broken.” Bates v. JPMorgan Chase
Bank, NA, 768 F.3d 1126, 1130 (11th Cir. 2014) (quoting
Norton v. Budget Rent A Car Sys., Inc., 705 S.E.2d
305, 306 (Ga.Ct.App. 2010)). “A breach occurs if a
contracting party repudiates or renounces liability under the
contract; fails to perform the engagement as specified in the
contract; or does some act that renders performance
impossible.” UWork.com, Inc. v. Paragon Techs.,
Inc., 740 S.E.2d 887, 893 (Ga.Ct.App. 2013) (citations
and punctuation omitted). “When a court construes
contractual terms to determine if a breach has occurred, the
cardinal rule of contract construction is to ascertain the
intention of the parties.” Id. (quoting
Bd. of Comm'rs of Crisp Cty. v. City Comm'rs of
Cordele, 727 S.E.2d 524, 527 (Ga.Ct.App. 2012)). If the
language of a contract is plain and unambiguous, no
construction is required and courts must give the contract an
interpretation of ordinary significance. See Calabro v.
State Med. Educ. Bd., 640 S.E.2d 581, 583 (Ga.Ct.App.
2006). “[I]f the contract is ambiguous . . . courts
must apply the rules of contract construction to resolve the
ambiguity.” Old Republic Nat'l Ins. Co. v.
Panella, 734 S.E.2d 523, 526 (Ga.Ct.App. 2012) (quoting
Holmes v. Clear Channel Outdoor, Inc., 644 S.E.2d
311, 313 (Ga.Ct.App. 2007)).
Breach Arising from Failure to Pay Royalties on Non-OLIF
Devices (Count One)
argues Count One should be dismissed because the OLIF device
identified in the 2010 agreement is the same as “the
MIS PEEK” device referred to in the 2009 agreement. It
thus claims that the merger clause in the 2010 agreement
precludes Schell's claims under the 2009 agreement for
royalties on the OLIF device after July 1, 2010. (Dkt. 15-1
at 3-4.) Likewise, it claims that the OLIF device was the one
and only MIS PEEK device covered by the 2009 agreement,
preventing Schell from recovering for any non-OLIF devices.
2010 agreement states OLIF is a Polyetheretherketone (PEEK)
Oblique Lumber Interbody Fusion Device, but it does not
mention the MIS PEEK Interbody Device or any other PEEK
devices. (Dkt. 6 at 13.) Amendia directs the Court to the
notation “OLLIF” (sic) and line drawn to
“the MIS PEEK Interbody Device” in
provision 2.2 of the 2009 agreement in the original exhibit 1
to Schell's complaint to support its argument. (Dkt. 15-1
at 5 (quoting Dkt. 1 at 25).) Amendia claims this shows the
OLIF device was the one and only MIS PEEK device covered by
the 2009 agreement. It argues that ...