As I’ve written before, health care is “one of the ugliest businesses in America.” Health care litigation is often just as contentious.

Today’s example comes from Robotics v. Deviedma, No. 09-cv-3552, 2009 U.S. Dist. LEXIS 112077 (E.D. Pa. Nov. 30, 2009), which denied in part and granted in part Defendants’ motion to dismiss.

The facts:

Health Robotics, S.r.L. ("HRSRL") is an Italian company that designs, develops, markets and licences robotic medical preparation products. Plaintiff, Devon Robotics, signed two agreements with HRSRL for the distribution of two robotic medication preparation products for hospitals and health care facilities, i.v.Station and CytoCare. … At the time these agreements were negotiated and signed, Mr. DeViedma, one of the Defendants, served as General Counsel for HRSRL. These contracts between Devon Robotics and HRSRL contained an identical arbitration clause which requires all disputes arising from the agreement to be arbitrated in Switzerland.

Plaintiffs claim that on March 1, 2009, Mr. DeViedma was hired as Devon Robotics’ Chief Operating Officer ("COO"). In his position as COO, DeViedma was solely responsible for the management of sales, marketing, support and installation of CytoCare robots on Devon’s behalf. All of Devon Robotics’ employees reported directly to DeViedma. Additionally, Mr. DeViedma served as the primary contact between Devon and HRSRL.

* * *

In December 2008, Devon Robotics began negotiating a contract with McKesson Corporation, another defendant, which would give McKesson the right to distribute CytoCare within a certain territory in the United States. DeViedma played a key role in negotiating the contract as Devon Robotics’ COO. On December 22, 2008, Devon Robotics and McKesson entered into a Confidential Disclosure and Non-Competition Agreement prohibiting McKesson from divulging or using any confidential information for any purpose other than analyzing its deal with Devon. After executing the agreement, McKesson engaged in extensive due diligence. According to Plaintiffs, around March 2009, McKesson and Devon reached an oral agreement regarding the material terms of the Exclusive Distribution, Licensing, Services and Support Agreement. The only thing that was needed to finalize the agreement was to allow McKesson’s due diligence of HRSRL in Italy. However, DeViedma, in his capacity as an officer of HRSRL, refused to permit McKesson representatives to visit Italy and complete the due diligence.

Later, after McKesson and Devon Robotics failed to come to an agreement, HRSRL terminated the CytoCare Agreement with Devon Robotics on July 30, 2009. Then on August 10, 2009, McKesson and HRSRL entered into a five year agreement granting McKesson distribution rights with regard to CytoCare in various areas in North America which had previously been controlled by Devon Robotics.

Naturally, Devon sued everyone, alleging breach of fiduciary duty, tortious interference with current and prospective contractual relations, defamation, and conspiracy.

Defendants first moved under Rule 12(b)(1) to dismiss on the grounds that the Devon/HRSRL agreements compelled arbitration:

[A]s this Court noted in Miron, the presumption of arbitrability has never been extended to claims by or against non-signatories. Miron v. BDO Seidman, LLP, 342 F. Supp. 2d 324 (E.D. Pa. 2004); see, e.g., Medtronic Ave Inc. v. Cordis Corp., 367 F.3d 147, 100 Fed. Appx. 865 (3rd Cir. 2004) (quoting Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress International, Ltd., 1 F.3d 639, 642 (7th Cir. 1993)). Because arbitration is a matter of contract, exceptional circumstances must apply before a court will impose a contractual agreement to arbitrate on a non-contracting party. AT&T Tech., 475 U.S. at 650. However, as this Court again noted in Miron, there are five established theories under which non-signatories may be bound to the arbitration agreements of others: (1) incorporation by reference; (2) assumption; (3) agency; (4) veil-piercing/alter ego; and (5) estoppel. Thomson-CFS v. American Arbitration Association, 64 F.3d 773, 776 (2d Cir. 1995). Furthermore, where the party seeking enforcement of the arbitration clause is a willing non-signatory an alternative theory of reverse estoppel may apply. Thomson-CFS, 64 F.3d at 779.

The only theory under which DeViedma may be able to enforce the arbitration clause is the alternative estoppel theory. The alternative estoppel theory binds a signatory to arbitrate at a non-signatory’s insistence where there is an obvious and close nexus between the non-signatories and the contract or the contracting parties. E.I. DuPont, 269 F.3d at 199. The two-part test for alternative estoppel requires a court to determine whether there is a ‘close relationship between the entities involved,’ and examine the ‘relationship of the alleged wrongs to the nonsignatory’s obligations and duties in the contract.’ E.I. DuPont, 269 F.3d at 199 (citing Thomson-CSF, 64 F.3d at 779); see also Bannett, 331 F. Supp. 2d at 360. To satisfy the second part of the test, the non-signatory seeking enforcement of an arbitration agreement must show that the claims against them are ‘intimately founded in and intertwined with’ the underlying obligations of the contract to which they were not a party. E.I. DuPont, 269 F.3d at 199 (citing Thomson-CSF, 64 F.3d at 779).

The essential question in situations such as these is whether plaintiffs would have an independent right to recover against the non-signatory defendants even if the contract containing the arbitration clause were void. ‘The plaintiff’s actual dependence on the underlying contract in making out the claim against the nonsignatory defendant is therefore always the sine qua non of an appropriate situation for applying equitable estoppel.’ Price Plaintiffs v. Humana Ins. Co., 285 F.3d 971, 976 (11th Cir. 2002) (rev’d on other grounds, PacifiCare Health Sys. v. Book, 538 U.S. 401, 123 S. Ct. 1531, 155 L. Ed. 2d 578 (2002)). In In re Humana, the Eleventh Circuit held that equitable estoppel was inappropriate where plaintiffs brought a RICO suit against a non-signatory defendant, because the RICO claims were based on a statutory remedy apart from any available remedy for breach of the underlying contract. In re Humana, 285 F.3d at 976."

Robotics v. Deviedma, No. 09-cv-3552, 2009 U.S. Dist. LEXIS 112077, at *11–13 (E.D. Pa. Nov. 30, 2009). Three strikes, one hit for the defendants:

It is not proper to dismiss this claim in favor of arbitration because the breach of fiduciary duty claim does not arise out of the various agreements between Devon Robotics and HRSRL. …

Plaintiffs’ claim of tortious interference with current and prospective contractual relations is not subject to the arbitration clauses in the various agreements between Devon Robotics and HRSRL. Count V of Plaintiffs claim is based on DeViedma’s alleged interference with various validation contracts. These contracts are not intimately intertwined with the i.v.Station and CytoCare agreements. …

Plaintiffs’ claim of defamation is not subject to the arbitration clauses in the various agreements between Devon Robotics and HRSRL. …

To the extent that Plaintiffs’ claim of conspiracy is based on the termination of the CytoCare agreement, their claim is dismissed. Plaintiffs’ Complaint alleges that the Defendants conspired to wrongfully terminate the CytoCare agreement. The determination as to whether the agreement was wrongfully terminated will be intimately related to the terms of the agreement. Additionally, there is an extremely close nexus between the non-signatory parties and Devon Robotics.

Id. at 13–16.

Defendants next moved under Rule 12(b)(6) to dismiss the claims on the merits, with three strikes (on the breach of fiduciary duty, tortious interference with current contractual relations, and defamation claims) and hits on the rest. Most notably, “Devon Robotics has pled that it had several validation contracts with different hospitals, that DeViedma purposefully interfered with those contracts for his own benefit, without justification, and that as a result, Devon lost substantial amounts of business. These pleadings are sufficient to establish a claim for tortious interference with existing contractual relations.”

Though the Court “grant[ed] Plaintiffs leave to amend their tortious interference with prospective contractual relations to include any claims related to the McKesson negotiations,” it added the caveat that “Although the Court granted leave to amend the tortious interference claim and Plaintiffs may choose to attempt to amend their conspiracy claim, it should be noted that the Court likely lacks jurisdiction over any underlying torts asserted in support of the conspiracy claim based on the CytoCare or i.v.Station agreements due to the arbitration clauses in the agreements.”

A big win for Devon Robotics and a guide for future plaintiffs — in the face of an arguably applicable arbitration agreement, they kept alive the core of their suit: breach of fiduciary duty, tortious interference, and defamation.