Fresh off the presses is Acumed LLC v. Advanced Surgical Servs., 2009 U.S. App. LEXIS 5854 (3d Cir., March 20, 2009), a charming setup in the insanely hostile and competitive world of medical devices:
Acumed is a manufacturer of surgical implants and related devices, and appellant [Morris] and [Advanced Surgical Services] are in the business of distributing surgical implants and other medical devices for various manufacturers, including Acumed, to hospitals and surgeons. … At the trial, Ryan Crognale, a sales representative for appellant, explained his view of the events that Casey described at Nazareth Hospital. Crognale testified that Morris directed him to deliver the implants to Nazareth and to attend the surgery. He then stated that after his earlier delivery of Acumed implants, he returned to the hospital and saw Casey in the operating room and observed that the physician doing the procedure was "not using my stuff anyway." Consequently, Crognale took the tray of instruments he previously had delivered and left the operating room. Thus, it appears that the physician performing the procedure used materials Acumed supplied through Surgical, its authorized representative.
As Crognale was leaving the surgery center, he encountered Casey, and an argument between the two representatives ensued. Appellant contends that during the argument Casey loudly accused Crognale of illegally selling Acumed inventory, an incident that appellant contends led Dr. Robert Frederick, a doctor at Nazareth, to stop doing business with it. Moreover, appellant contends that because of Dr. Frederick’s connection with a large group of physicians in Philadelphia, the confrontation was a factor in a decision by Jefferson Hospital in Philadelphia to exclude Morris from its operating theater for one year. As a result of the incident at Nazareth Hospital, Acumed sent another notice to its customers stating that Surgical was its only authorized representative in eastern Pennsylvania and southern New Jersey.
Can you guess what happened next?
Appellees filed the complaint in this action against appellant in the District Court charging it with violation of the Lanham Act, 15 U.S.C. § 1125, violation of Pennsylvania’s Anti-Dilution statute, 54 Pa. Cons. Stat. Ann. § 1124 (West 1996), unfair competition, breach of a non-disclosure provision in the Advanced-Acumed Agreement, conversion, unjust enrichment, and tortious interference with existing or prospective contractual relationships.
Appellant filed a four-count counterclaim against appellees. In counts I, II, and III appellant charged that Acumed breached its contract with appellant by not providing timely notice of termination of their relationship and by failing to pay the contractually required buy-out fee that became due to appellant when Acumed terminated their relationship. In addition, appellant charged that Acumed’s failure to pay the buy-out fee violated the Pennsylvania Commissioned Sales Representatives statute, 43 P.S. §§ 1471 et seq. (West 1991). In count IV ("counterclaim IV") appellant alleged that Acumed and Surgical ". . .converted property belonging to Advanced, defamed and disparaged Advanced maliciously and falsely, intentionally interfered with Advanced’s contractual and business relationships and competed unfairly against Advanced."
After a little more than a week of trial…
The jury returned a verdict on March 21, 2007, finding for appellees on their count against appellant for tortious interference with existing or prospective contractual relationships with appellees’ customers. The jury, however, rejected appellees’ claim that appellant had tortiously interfered with Acumed’s and Surgical’s contractual relationship between themselves and also rejected appellees’ other claims, including appellees’ Lanham Act claims. The jury also found against appellant on the portions of its counterclaims that had survived the District Court’s dismissals, i.e., the claims predicated on breach of contract and violation of the Pennsylvania Commissioned Sales Representatives statute. The jury awarded $ 20,000 in compensatory damages to Surgical and $ 0 in compensatory damages to Acumed on the tortious interference claim but found that both Acumed and Surgical were entitled to punitive damages. … The jury then returned a verdict awarding $ 1 in nominal damages to Acumed and punitive damages to both Acumed and Surgical Resources in the amount of $ 100,000 each.
As we indicated above, to recover on a tortious intentional interference with existing or prospective contractual relationships claim in Pennsylvania, a plaintiff must prove that the defendant was not privileged or justified in interfering with its contracts: "While some jurisdictions consider a justification for a defendant’s interference to be an affirmative defense, Pennsylvania courts require the plaintiff, as part of his prima facie case, to show that the defendant’s conduct was not justified." Triffin v. Janssen, 426 Pa. Super. 57, 626 A.2d 571, 574 n.3 (Pa. Super. Ct. 1993) (citing Thompson Coal 412 A.2d at 471 n.7); Silver v. Mendel, 894 F.2d 598, 602 n.6 (3d Cir. 1990). We hasten to add, however, that our conclusion does not depend on the allocation of the burden of proof on the privilege issue, as we would reach our result even if appellant had the burden of proof to establish the privilege as a defense, because the evidence established conclusively that appellant did so.
Pennsylvania has adopted section 768 of the Restatement (Second) of Torts, which recognizes that competitors, in certain circumstances, are privileged in the course of competition to interfere with others’ prospective contractual relationships. See Gilbert v. Otterson, 379 Pa. Super. 481, 550 A.2d 550, 554 (Pa. Super. Ct. 1988). The law necessarily recognizes this privilege because if more than one party seeks to sell similar products to prospective purchasers, both necessarily are interfering with the other’s attempt to do the same thing. Moreover, even if an entity has an existing contractual relationship with another entity, a stranger to the relationship must be privileged to seek to replace one of the entities lest competition be stifled. Thus, under section 768: "[o]ne who intentionally causes a third person not to enter into a prospective contractual relation with another who is his competitor or not to continue an existing contract terminable at will does not interfere improperly with the other’s relation if: (a) the relation concerns [*37] a matter involved in the competition between the actor and the other; (b) the actor does not employ wrongful means; (c) his action does not create or continue an unlawful restraint of trade; and (d) his purpose is at least in part to advance his interest in competing with the other."
Comment e to section 768 elaborates on the type of conduct that constitutes wrongful means: "If the actor employs wrongful means, he is not justified under the rule stated in this Section. The predatory means discussed in § 767, Comment c, physical violence, fraud, civil suits and criminal prosecutions, are all wrongful in the situation covered by this Section." Courts relying on comment e have interpreted the wrongful means element to require that a plaintiff, to be successful in a tortious interference action, demonstrate that a defendant engaged in conduct that was actionable on a basis independent of the interference claim. See Brokerage Concepts, 140 F.3d at 531 (citing DP-Tek, Inc. v. A T & T Global Info. Solutions Co., 100 F.3d 828, 833-35 (10th Cir. 1996)). Moreover, we noted in 2000 that even though the Pennsylvania courts have not interpreted the "wrongful means" element of section 768, it is likely that the Pennsylvania Supreme Court would adopt this meaning, that is, for conduct to be wrongful it must be actionable for a reason independent from the claim of tortious interference itself. See Nat’l Data Payment Sys., Inc. v. Meridian Bank, 212 F.3d 849, 858 (3d Cir. 2000); see also CGB Occupational Therapy, Inc. v. RHA Health Servs. Inc., 357 F.3d 375, 389 (3d Cir. 2004). Nothing in later Pennsylvania Supreme Court decisions to which the parties have directed our attention or of which we are aware leads us to change our view of this issue.
I’m sure you can imagine what happened next.
We therefore will reverse the District Court’s order of May 21, 2007, to the extent that it denied appellant a judgment as a matter of law on the tortious interference claim, and will remand the case to the District Court for it to enter judgment as a matter of law in favor of appellant on that claim and to set aside the prior judgment on the claim. As a result, we also will reverse the jury’s award of compensatory and punitive damages against appellant and the District Court’s grant of an injunction in appellees’ favor.
That’s why business contingent fee cases demand such a high fee and why commercial litigators have to be so selective in the cases they take. On the most basic level, appellees won in the District Court and at trial and post-trial after years of complicated, intense litigation and trial.
How complicated? The Third Circuit Court of Appeal’s opinion is a whopping 18,785 words, about one-fifth the length of a typical paperback novel. The briefs from the complaint to the appeal no doubt exceeded 100,000 words.
And the plaintiffs walked away with nothing.