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Low v. Omni Life Science Inc.

United States District Court, W.D. Oklahoma

July 17, 2019

WARREN G. LOW and THOMAS K. TKACH, Plaintiffs,



         Before the Court is the Motion to Dismiss Counts II, III, and IV of Plaintiffs' Amended Complaint [Doc. No. 14] filed by Defendants OMNI Life Science, Inc., George Cipolletti, and Elizabeth Cipolletti. It is at issue. See Resp., Doc No. 19; Reply, Doc. No. 22. These named defendants seek dismissal of Plaintiffs' second, third, and fourth causes of action-for fraud, negligent misrepresentation, and negligence performance of contract, respectively-based on Federal Rules of Civil Procedure 8(a), 9(b), and 12(b)(6).[1] Mr. Cipolletti and Ms. Cipolletti also seek dismissal of all claims asserted against them based on the fiduciary shield doctrine under Rule 12(b)(6) and based on the Court's lack of personal jurisdiction over them under Rule 12(b)(2). Finally, Defendants assert that the claims asserted against the John Doe defendants-who are “officers, directors or shareholders of OMNI”-should be dismissed as improperly brought. Am. Compl. ¶ 6, Doc. No. 9. Defendants do not seek dismissal of Plaintiffs' breach of contract claim (the first count in the Amended Complaint), which is asserted against OMNI only.

         Plaintiffs invoke the Court's subject-matter jurisdiction under 28 U.S.C. § 1332(a).

         I. Background[2]

         Plaintiffs are medical doctors who entered into a product development and clinical surgical consulting service agreement with OMNI. Pursuant to that agreement, Plaintiffs were to provide consulting services to OMNI related to knee and hip reconstruction and replacement products in exchange for certain percentages of OMNI's net sales of such products. These royalty payments were to be made at least annually, and within 60 days after OMNI's annual calculation of its net sales, subject to market-caused barriers to payment that might arise, with such payment timing changes to be reasonably consented to by Plaintiffs. The gravamen of Plaintiffs' lawsuit is that the payments were not made or, when made, were not made timely. Plaintiffs also claim they were misled by Defendants about calculation of these payments and when they would be paid.

         From February 2010 through July 2017, OMNI-via various officers or employees-sent at least 28 communications to Plaintiffs regarding calculation of the amounts owed by OMNI to Plaintiffs and when such payments would be made. Ten of these communications came from Mr. Cipolletti and five came from Ms. Cipolletti. The remainder were sent by other OMNI officers or employees not named as defendants in this action. In its communications regarding the royalty payments, OMNI (per Plaintiffs) “improperly and deceitfully calculat[ed Plaintiffs'] Royalties . . . by improperly deducting the average cost of goods sold, sales management compensation and related expenses, medical device taxes and shipping revenues from the amount used to calculate [Plaintiffs'] royalties” and by “improperly exclud[ing] amounts invoiced to and collected from the Products used by surgeons at St. Anthony's Bone and Joint Hospital” and “amounts invoiced for and collected from the Apex Posterior Stabilized Knee System, ” “the Apex Revision Knee System, ” “the Apex Revision Tibia, ” “the Apex Modular Tibia, ” and for “the license OMNI sold to its affiliate . . . to manufacture, distribute and sell as many of the Products as [the affiliate] wishe[d] in multiple countries.” Id. ¶¶ 26, 29-35. Plaintiffs also assert that Defendants misrepresented to them when royalty payments would be made in these communications.

         Mr. Cipolletti and Ms. Cipolletti are two of OMNI's officers and are residents of Massachusetts and Pennsylvania, respectively.[3] Plaintiffs allege Mr. Cipolletti “made several trips to Oklahoma in connection with the Product Development and Clinical Surgical Consulting Services Agreement Plaintiffs entered into with . . . OMNI” and also made multiple false promises to Plaintiffs regarding when royalty payments would be made. Id. ¶ 4. Mr. Cipolletti sent Plaintiffs multiple communications relating to royalties owed by OMNI to Plaintiffs which Plaintiffs allege to have been intentionally misleading.

         Plaintiffs allege that Ms. Cipolletti “sent [them] numerous false ‘Statements of Account' in connection with the Product Development and Clinical Surgical Consulting Agreement Plaintiffs entered into with . . . OMNI” and “also sent letters to Plaintiffs . . . in Oklahoma[] which . . . contained false and deceptive statements”-presumably the five specific communications referenced supra. Id. ¶ 5.

         II. Pleading standard

          In considering a motion to dismiss pursuant to Rule 12(b)(6), a court must determine whether the plaintiff has stated claims upon which relief may be granted. Under Rule 8(a)(2), a pleading is to contain “a short and plain statement of [each] claim showing that the pleader is entitled to relief.” While Rule 8(a)(2) “does not require ‘detailed factual allegations,' . . . it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). As such, “labels and conclusions” and “a formulaic recitation of the elements of a cause of action” are insufficient. Twombly, 550 U.S. at 555. In essence, a plaintiff must “nudge[] [his] claims across the line from conceivable to plausible” in order to survive a motion for dismissal. Id. at 570.

         To assess the sufficiency of claims made by a plaintiff, a two-pronged approach is deployed. First, “a judge ruling on a defendant's motion to dismiss a complaint must accept as true all of the factual allegations contained in the complaint.” Twombly, 550 U.S. at 572 (quotation marks and citation omitted). A court need not, however, accept the veracity of “mere conclusory statements.” Iqbal, 556 U.S. at 678. Second, in light of the well-pleaded factual allegations, the court must determine whether “a complaint states . . . plausible claim[s] for relief.” Id. at 679.

         In addition to Rule 8(a)'s generally applicable pleading requirements, certain claims “must state with particularity the circumstances constituting fraud or mistake, ” though “[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” Fed.R.Civ.P. 9(b). At bottom, a “complaint alleging fraud [must] set forth the time, place and contents of the false representation, the identity of the party making the false statements and the consequences thereof.” Koch v. Koch Indus., Inc., 203 F.3d 1202, 1236 (10th Cir. 2000) (quotation marks and citation omitted). The rule's “purpose is to afford defendant[s] fair notice of plaintiff[s'] claims and the factual ground[s] upon which they are based.” Id. (quotation marks and citation omitted).

         III. Analysis and discussion

         A. Defendants' personal jurisdiction arguments

         In a diversity case, a federal district court “may exercise personal jurisdiction over a defendant who is subject to the jurisdiction of a state court in the state where the federal court is located.” Newsome v. Gallacher, 722 F.3d 1257, 1264 (10th Cir. 2013) (quotation marks omitted) (citing Fed.R.Civ.P. 4(k)(1)(A)). The Court must therefore apply state law, by which “[t]he Oklahoma legislature has authorized Oklahoma courts to ‘exercise jurisdiction on any basis consistent with the [Oklahoma] Constitution . . . and the Constitution of the United States.'” Id. (quoting Okla. Stat. tit. 12, § 2004(F)). Because Plaintiffs allege only contacts-based jurisdiction and there is no allegation that jurisdiction over Defendants would violate the Oklahoma Constitution, the Court applies a well-known standard: “[D]efendants must have minimum contacts with [Oklahoma], such that having to defend a lawsuit [in Oklahoma] would not offend traditional notions of fair play and substantial justice.” Id. (quotation marks and citation omitted). Plaintiffs' burden at this stage of litigation is “light.” Wenz v. Memery Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995). Because Defendants have not submitted evidence to contradict Plaintiffs' allegations in the Amended Complaint, the Court accepts as true the well-pleaded facts therein to determine whether there is a prima facie showing of personal jurisdiction. See id.

         Here, Plaintiffs assert the existence of both general contacts-based jurisdiction and specific contacts-based jurisdiction as to Mr. Cipolletti and Ms. Cipolletti. See Am. Compl. ¶ 9, Doc. No. 9. But Plaintiffs have not indicated the existence of the “limited set of affiliations with a forum [to] render” either Mr. Cipolletti or Ms. Cipolletti “amenable to all-purpose jurisdiction” in the State of Oklahoma. Daimler AG v. Bauman, 571 U.S. 117, 137 (2014). “For an individual, the paradigm forum for the exercise of general jurisdiction is the individual's domicile” (id.)-here, Massachusetts for Mr. Cipolletti and Pennsylvania for Ms. Cipolletti. See Am. Compl. ¶¶ 4-5, Doc. No. 9. Plaintiffs have not alleged facts to support even the prima facie existence of general jurisdiction over Mr. Cipolletti or Ms. Cipolletti in Oklahoma, and the Court finds that it lacks such jurisdiction.

         The Court therefore turns to whether Plaintiffs have alleged facts supporting specific contacts-based jurisdiction as to Mr. Cipolletti and Ms. Cipoletti. In its analysis, the Court considers: “(1) whether the defendant purposefully directed [his or her] activities at residents of the forum state; (2) whether the plaintiff[s'] injury arose from those purposefully directed activities; and (3) whether exercising jurisdiction would offend traditional notions of fair play and substantial justice.” Newsome, 722 F.3d at 1264. For the first requirement, “purposeful direction has three elements: (a) an intentional action that was (b) expressly aimed at the forum state with (c) knowledge that the brunt of the injury would be felt in the forum state.” Id. at 1264-65 (quotation marks and citation omitted). For the second requirement (the arising-from requirement), the Court-applying the most restrictive test-“examine[s] whether any of the defendant's contacts with the forum are relevant to the merits of the plaintiff[s'] claim[s].” Id. at 1270 (quotation marks and citation omitted). Finally, for the third requirement, the Court's fair-play-and-substantial-justice analysis involves five factors:

(1) the burden on the defendant, (2) the forum state's interest in resolving the dispute, (3) the plaintiff's interest in receiving convenient and effective relief, (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states in furthering fundamental substantive social policies.

Id. at 1271 (quotation marks and citation omitted).

         1. Mr. Cipolletti

         Plaintiffs allege that Mr. Cipolletti made several trips to Oklahoma regarding Plaintiffs' agreement with OMNI, that he made promises to Plaintiffs while Plaintiffs were in Oklahoma, and that he sent ten different communications regarding Plaintiffs' agreement with OMNI to them in Oklahoma. Plaintiffs have alleged that Mr. Cipolletti's communications with them were intentional (see e.g., Am. Compl. ¶ 45, Doc. No. 9 (indicating that Mr. Cipolletti's letter made a “material[] represent[ation]”)) and were aimed at them. There is no indication that Mr. Cipolletti may have been unaware of Plaintiffs' location; the agreement executed by Mr. Cipolletti on behalf of OMNI was “entered into . . . in Oklahoma County, Oklahoma.” Id. ¶¶ 1-2. And the agreement stated both that Dr. Low was “a physician duly licensed to practice medicine in the state of Oklahoma” and that notices required by the agreement should be sent to him in Oklahoma. Product Development & Clinical/Surgical Consulting Services Agreement, Doc. ...

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