192 F. Supp. 3d 223
D. Mass.2016Background
- CTI was the exclusive distributor for certain Oridion products in the Midwest under a 2008 Distribution Agreement; Covidien acquired Oridion in June 2012 and successorized the contract.
- §15(a)(ii) allowed the company to terminate to “engage in a direct sales effort”; §15(c) provided a 5% termination payment; §15(d) required the company to “honor those agreements between Distributor and end‑users … until the termination of Distributor’s agreements with end‑users, and shall sell … at established Oridion ODN Prices.”
- Parties agree the defined term “Oridion ODN Price” is the distributor (wholesale) price listed in the Pricing Handbook, which neither party sells directly to end users.
- Some end users had IDN contracts directly with Oridion/Covidien (10 named IDN customers); others (8) had supply agreements directly with CTI. IDN agreements typically ran three years and were memorialized by amendments to the Distribution Agreement incorporating pricing terms.
- Covidien terminated the agreement effective March 31, 2013, invoked §15(a)(ii), began direct sales April 1, 2013, and paid the §15(c) termination amount. CTI sued for breach, breach of implied covenant, unjust enrichment, negligent misrepresentation, and Chapter 93A violations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §15(d) required Covidien to continue supplying CTI so CTI could fulfill IDN contracts | §15(d)’s “honor those agreements” and “ODN Prices” mean Covidien must sell to CTI at distributor prices so CTI can continue as distributor until end‑user contract expirations | §15(d) unambiguously permits Covidien itself to “honor” the agreements by selling directly to end users; distributor price term does not change which party sells | For the 10 IDN customers (and Sparrow Health) agreement unambiguously allows Covidien to sell directly; summary judgment for Covidien as to those accounts |
| Whether §15(d) is ambiguous as to the eight end users with supply agreements directly with CTI | CTI: §15(d) ambiguous; a jury should decide whether CTI retains right to sell to those end users until their contracts expire | Covidien: even if ambiguous, extrinsic evidence overwhelmingly supports Covidien’s reading | Court: §15(d) ambiguous as to the eight CTI‑supply accounts; extrinsic evidence is contested — jury question; summary judgment denied for those accounts |
| Breach of implied covenant / unfair dealings surrounding IDN negotiations | CTI: Covidien misrepresented that CTI would remain exclusive distributor for IDNs and hid key IDN contract terms to secure IDN business | Covidien: covenant claim is duplicative or barred because termination exercised under express contract rights; pre‑contract negotiation conduct not actionable | Court: Denied summary judgment — factual disputes exist about Covidien’s representations, concealment of IDN terms, and intent to obtain unfair advantage (jury question) |
| Negligent misrepresentation and unjust enrichment; Chapter 93A | CTI: company reps made false assurances inducing CTI to promote IDN agreements; Covidien was unjustly enriched by CTI’s work; Chapter 93A liability follows | Covidien: reliance on oral assurances unreasonable given written agreement/amendments; unjust enrichment barred by express contract; Chapter 93A is merely a contract dispute | Court: Summary judgment allowed for negligent misrepresentation and unjust enrichment (contract governs); Chapter 93A claim survives summary judgment (factual disputes exist about deceptive conduct and concealment) |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard) (movant must show absence of evidence for nonmoving party)
- Sands v. Ridefilm Corp., 212 F.3d 657 (1st Cir.) (reliance on oral assurances unreasonable in face of contrary written statements)
- Barclays Bank PLC v. Poynter, 710 F.3d 16 (1st Cir.) (contract ambiguity is a question of law; examine plain text independent of extrinsic drafting history)
- Farmers Ins. Exch. v. RNK, Inc., 632 F.3d 777 (1st Cir.) (only facially inconsistent or reasonably disputable phrasing creates ambiguity; plain terms control)
- Trifiro v. N.Y. Life Ins. Co., 845 F.2d 30 (1st Cir.) (a plaintiff’s reliance on oral assurances is unreasonable when confronted with conflicting written terms)
- DeWolfe v. Hingham Centre, Ltd., 985 N.E.2d 1187 (Mass.) (elements of negligent misrepresentation under Massachusetts law)