ACUMED LLC, A DELAWARE LIMITED LIABILITY CORPORATION; SURGICAL RESOURCES OF PENNSYLVANIA, INC. v. ADVANCED SURGICAL SERVICES, INC.; ROBERT MORRIS, AN INDIVIDUAL,
Nos. 07-1869 and 07-2562
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
March 20, 2009
AMBRO аnd GREENBERG, Circuit Judges, and RODRIGUEZ, District Judge
PRECEDENTIAL; Argued December 2, 2008
Opinions of the United States Court of Appeals for the Third Circuit
3-20-2009
Acumed LLC v. Advanced Surgical
Precedential or Non-Precedential: Precedential
Docket No. 07-1869
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Recommended Citation
”Acumed LLC v. Advanced Surgical” (2009). 2009 Decisions. Paper 1622. http://digitalcommons.law.villanova.edu/thirdcircuit_2009/1622
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civ. No. 05-02711) Honorable Juan R. Sanchez, District Judge
Erin L. Ginsburg
DLA Piper
1650 Market Street
One Liberty Place, 50th Floor
Philadelphia, PA 19103-0000
Bruce W. McCullough (argued)
McCullough & McKenty
1225 North King Street
P.O. Box 397, Suited 1100
Wilmington, DE 19899-0000
Attorneys for Appelles
Gary Green (argued)
Sidkoff, Pincus & Green
1101 Market Street
Suite 2700
Philadelphia, PA 19107-0000
Attorneys for Appellants
*The Honorable Joseph H. Rodriguez, Judge of the United States District Court for the District of New Jersey, sitting by designation.
GREENBERG, Circuit Judge.
I. INTRODUCTION
This matter comes on before this Court on an appeal from a final order entered in the District Court on May 21, 2007, accompanying an opinion dated May 18, 2007, as well as from a separate judgment for compensatory and punitive damages in this case involving claims and counterclaims among parties in the surgical implant business. See Acumed LLC v. Advanced Surgical Servs., Inc., Civ. No. 05-2711, 2007 WL 1500051 (E.D. Pa. May 18, 2007). The District Court entered the order and judgment from which appellants, Advanced Surgical Services, Inc. (“Advanced“) and Robert C. Morris (“Morris“), have taken their appeal, in favor of appellees Acumed LLC (“Acumed“) and Surgical Resources of Pennsylvania, Inc. (“Surgical“).1 Inasmuch as Morris is the president and sole
Appellant challenges (1) the denial of its motion for judgment as a matter of law on appellees’ claims; (2) the award of damages, particularly punitive damages, against it; (3) the grant of partial summary judgment in favor of appellees on appellant‘s counterclaim for abuse of process, unfair competition, and defamation; (4) the grant of a judgment as a matter of law in favor of appellees on appellant‘s counterclaim for tortious interference with contractual relationships; (5) certain of the District Court‘s evidentiary rulings; (6) the denial of appellant‘s application for attorneys’ fees; (7) the grant of injunctive relief against it; and (8) the order holding appellant in contempt of court.2 Though both appellees prevailed only in
For the reasons we discuss below, we conclude that the application of legal principles required the District Court to have granted appellant‘s post-trial Rule 50(b) motion seeking to set aside the jury‘s verdict in favor of appellees on a tortious interference with contractual relationship claim that appellees pled against appellant and attempted to prove at trial.3 Therefore, we will reverse the District Court‘s determination
II. BACKGROUND
A. Facts
To the extent that appellant challenges the order granting partial summary judgment against it, we state the facts most favorably to it, but to the extent that the appeal challenges the jury‘s verdict, we state the facts on any disputed issue most consistently with the verdict. See Johnson v. Campbell, 332 F.3d 199, 204 (3d Cir. 2003).
Acumed is a manufacturer of surgical implants and related devices, and appellant and Surgical are in the business of distributing surgical implants and other medical devices for various manufacturers, including Acumed, to hospitals and surgeons. Acumed and Morris began a relationship in 1996 when Joe Richioni, then Acumed‘s authorized sales
In late 1999, its “loose partners” dissolved RMW, following which Acumed contracted with Morris‘s company, Advanced, for it to become Acumed‘s exclusive sales representative in southeastern Pennsylvania. Appellant and Acumed differ, however, on the nature of their sales representative agreement. Ordinarily the written terms of an agreement should be clear, though their meaning may be in dispute, but the situation here varies from the ordinary because Acumed presented evidence explaining the terms of its agreement with Advanced, but did not produce a written contract between Advanced and Acumed. For its part, appellant produced a contract purportedly evidencing the agreement
Throughout the trial and this appeal, Acumed has maintained that Advanced was its commissioned sales representative under an agreement identical to the earlier RMW Agreement, and, in that capacity, placed orders from surgeons and hospitals with Acumed, who then shipped the product directly to its purchaser. Nevertheless, even as a sales representative appellant may have had Acumed‘s products on hand as consignment inventory for direct delivery to an ordering surgeon or hospital. In any event, regardless of how appellant or Acumed filled the order, when a purchaser paid Acumed on an invoice for a sale that appellant had obtained, Acumed paid appellant a commission.
In contrast to Acumed‘s version of their contractual relationship, appellant argued and still argues that its contract with Acumed was a “hybrid” agreement under which it acted both as a sales representative and a stocking distributor. Appellant contended that in its role as a stocking distributor, it purchased products directly from Acumed for resale to hospitals or surgeons. Appellant further alleged that under the terms of the Advanced-Acumed Agreement, if Acumed terminated the agreement, Acumed would pay a “buy-out” fee to appellant. Appellant explains that it sought “buy-out” fees from the manufacturers it represented to compensate it for its expenses in
In January 2000, during the time of the Advanced-Acumed relationship, appellant sometimes bought Acumed products under the name Allied Surgical (“Allied“), an unincorporated entity not to be confused with appellee Surgical Resources of Pennsylvania or appellant Advanced Surgical Services. Appellant contended that it formed Allied so that it
In January 2001, Acumed, citing what it believed was appellant‘s poor sales performance, terminated the Advanced-Acumed Agreement. Morris testified that after the termination of the contract he returned the inventory that appellant had acquired in its sales representative role from Acumed and attempted to sell back to Acumed inventory it had acquired as a stocking distributor, but Acumed refused to buy back the inventory. Morris also testified that after Acumed terminated Advanced‘s contract, appellant continued to sell Acumed products from 2001 to 2004 in eastern Pennsylvania and New Jersey as well as in areas beyond its former exclusive territory under the Advanced-Acumed Agreement. According to appellant, the sales, however, were sporadic, and appellant only sold Acumed products when customers specifically requested them. Morris estimated that appellant made approximately 25 sales of Acumed products to ten different customers during the three-year period.
In Sеptember 2002, Surgical and Acumed entered into an agreement designating Surgical as Acumed‘s exclusive sales agent in eastern Pennsylvania and southern New Jersey; Surgical thus took over what had been Advanced‘s territory. It is, of course, evident that there was a hiatus between the periods
Sometime after Surgical became an Acumed sales representative, an employee at Bloomsburg Hospital in Pennsylvania advised Fred Zullo, then the Vice President of Surgical, that a representative from another company had indicated to the hospital staff that he could provide Acumed products. This information led Acumed to send a memorandum dated October 9, 2003, to its customers in eastern Pennsylvania and New Jersey informing them that Surgical was its only authorized representative in that territory and Acumed would not extend its warranty to its products sold by anyone other than its authorized sales representative.
In December 2004, Chad Casey, a Surgical sales representative, brought Acumed implants and instruments to Nazareth Hospital for use in a surgical procedure. When Casey arrived at Nazareth, he discovered that another person already had delivered a set of Acumed implants to Nazareth for the procedure.
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 the hospital and saw Casey in the operating room and observed that the physician doing the procedure was “not using my stuff anyway.” App. at 2158. Consequently, Crognale took the tray of instruments he
As Crognale was leaving the surgery center, he encountered Casey, and an argument between the two representatives ensued. Appellant contеnds 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.
B. Procedural History
Appellees filed the complaint in this action against appellant in the District Court charging it with violation of the
Appellees asserted their claims for tortious interference with contractual relationships on two theories. First, appellees alleged that appellant tortiously interfered with Acumed‘s and Surgical‘s contractual relationship providing for Surgical within its territory to be Acumed‘s sole authorized dealer by making false and misleading statements regarding Advanced‘s status. Second, Acumed alleged that appellant‘s sale of Acumed products and false and misleading statements tortiously interfered with Surgical‘s and Acumed‘s relationships with existing and prospective customers. Appellees charged in their Lanham Act claim that appellant made false and misleading statements to hold itself out as an authorized representative of Acumed in southeastern Pennsylvania and New Jersey.
Appellant filed a four-count counterclaim against appellees. In counts I, II, and III appellant charged that Acumed
After completion of discovery, appellant filed a motion to dismiss or, in the alternative, for summary judgment, and the parties submitted letter briefs addressing summary judgment issues.6 After hearing oral arguments on the letter briefs on
On March 19, 2007, at the conclusion of appellant‘s testimony, Surgical moved for a judgment as a matter of law with respect to the remaining claims in counterclaim IV, and both appellees moved for judgment as a matter of law on other portions of the case. The following day the District Court entered an order granting Surgical‘s motion against appellant with respect to counterclaim IV but reserving judgment on the other aspects of appellees’ motions for judgment, including the tortious interference with contractual relationships, conversion, and unfair competition claims. Ultimately, however, the Court granted judgment as a matter of law dismissing certain of appellant‘s claims that had survived the earlier dismissal of portions of counterclaim IV.
The jury returned a verdict on March 21, 2007, finding
In anticipation of proceedings to determine the quantum of punitive damages, the Court required appellant to produce financial documents relating to its net worth.7 On March 22,
On March 23, 2007, the District Court, two days after the jury returned its original verdict, allowed the parties to make arguments to the jury on the question of punitive damages. At that time the Court instructed the jury that to award punitive damages it “must return a verdict for [Acumed] in a nominal sum, such as one dollar.” App. at 3494. 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.
Appellant filed post-verdict motions requesting entry of a judgment as a matter of law in its favor under Rule 50(b), or, in the alternative, entry of an amended judgment, a remittur of damages, and/or a new trial. In addition, appellant sought attorneys’ fees under the Lanham Act and the Advanced-Acumed Agreement even though Acumed, but not appellant, contended that the Advanced-Acumed Agreement followed the earlier RMW Agreement and consequently contained a non-disclosure provision providing for a counsel fee in the event of litigation regarding it. Moreover, appellant requested that the
III. JURISDICTION AND STANDARDS OF REVIEW
The District Court had jurisdiction over the Lanham Act claims pursuant to
Courts of appeals have jurisdiction under
When appellant filed its first notice of appeal, the case still was pending in the District Court, a procedural posture that regularly presents a question whether a court of appeals has jurisdiction over an appeal. We need not determine, however, whether the contempt of court order was final and appealable under section 1291, or on another basis, when appellant filed its appeal from that order, because the District Court subsequently resolved all the outstanding issues and, on any theory, the case in all of its aspects then became final in the District Court and thus became appealable. Therefore, the contempt of court order, if not appealable earlier, became appealable at that time. See Aluminum Co. of Am. v. Beazer East, Inc., 124 F.3d 551, 557 (3d Cir. 1997) (“Even if the appeals court would have lacked jurisdiction at the time an appeal was filed, the court has jurisdiction if, as a result of subsequent events, there are no longer аny claims left to be resolved by the district court.“).
Various standards of review are applicable on this appeal. First, “[w]e review a denial of judgment as a matter of law de novo, viewing the evidence in the light most favorable to the prevailing party.” Monteiro v. City of Elizabeth, 436 F.3d 397, 404 (3d Cir. 2006). On this appeal the parties have treated the applicable state law as that of Pennsylvania, and therefore so do we.8 Ordinarily, a court may grant a judgment as a matter of law
contrary to the verdict only if “the record is critically deficient of the minimum quantum of evidence” to sustain the verdict. Gomez v. Allegheny Health Servs., Inc., 71 F.3d 1079, 1083 (3d Cir. 1995). Thus, the usual formulation of the standard of review on an appeal from the denial of a defendant‘s motion for judgment as a matter of law requires an appellate court to determine “whether the evidence is sufficient to sustain liability,” and in considering that issue the court “may not weigh the evidence, determine the credibility of witnesses, or substitute its version of the facts for the jury‘s version.” Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1166 (3d Cir. 1993). Here, however, though we apply the well-established standard of review to our recitation of the facts, the traditional standard of review will become insufficient because we will be constrained to reverse the judgment on the appellees’ tortious interference claim on a purely legal basis that does not depend on rejecting the jury‘s findings on the evidence at the trial. Rather, we accept those findings but conclude that the verdict itself requires that we reverse the tortious interference claim judgment against appellant by granting its motion for judgment as a matter of law.
Second, our review of a grant of summary judgment is plenary, and in making that review we use the same standard as a district court: whether there are genuine issues of material fact
To the extent that a district court as a matter of law is empowered to award attorneys’ fees, we review its disposition of a request for attorneys’ fees on an abuse of discretion basis. Pardini v. Allegheny Intermediate Unit, 524 F.3d 419, 422 (3d Cir. 2008). There is “[a]n abuse of discretion . . . when a district court‘s decision rests upon a clearly erroneous finding of fact, an errant conclusion of law or an improper application of law to fact. However, if the District Court denied the fees based on its conclusion on questions of law, our review is plenary.” Id. (citation and quotation omitted). We review a contempt order on an abuse of discretion basis as well. Harris v. City of Philadelphia, 47 F.3d 1311, 1321 (3d Cir. 1995).
IV. DISCUSSION
A. Tortious Interference
We begin our analysis by addressing appellant‘s contention that appellees failed to establish sufficiently their claim for tortious interference with existing or prospective
As the foregoing formulation of the components of a tortious interference claim makes clear, Pennsylvania distinguishes between claims for interference with existing contractual relations and claims for interference with prospective contractual relations. See Thompson Coal Co. v. Pike Coal Co., 412 A.2d 466, 470-71 (Pa. 1979). In this case, though the jury found that appellant interfered with appellees’ existing and prospective relationships with purchasing surgeons and hospitals, appellees do not direct our attention to evidence setting forth the existing contracts with which they believed appellant interfered. In fact, the only evidence appellees presented of a material existing contract was the contract between themselves. The jury, however, found that appellant‘s sales of Acumed products after 2001 did not interfere with the contract between Surgical and Acumed, and appellees do not challenge that outcome on this appeal. We therefore conclude
In determining whether there is a prospective contractual relationship in a tortious interference case, Pennsylvania courts have considered whether the evidence supports a finding that there was an objectively “reasonable likelihood or probability”
Morris, in uncontradicted testimony, explained that appellant only sold Acumed products after the termination of the Advanced-Acumed Agreement when customers specifically requested that appellant supply the Acumed brand. Furthermore, it is undisputed that at the times material to this case appellant and Surgical were the only distributors of Acumed products in the eastern Pennsylvania and southern New Jersey region. Therefore, inasmuch аs it appears that Surgical was the only distributor of Acumed products in its territory other than appellant, and the customers stated their preference specifically for Acumed products, the customers may have entered into contractual relationships with Acumed or its authorized representative, Surgical, for the purchase of Acumed products but for appellant‘s sales of those products.10 On the
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, 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, 550 A.2d 550, 554 (Pa. Super. Ct. 1988).
“[o]ne who intentionally causes a third person not to enter into a prospective contractual relation with another whо 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 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.”
Clearly, the record requires a conclusion that appellant‘s sales met the four components of a section 768 justification defense with the possible exception of the second element, the use of wrongful means in the interference. Thus, we confine our discussion to that element, which is the only one that we regard as being in real issue on this appeal. With respect to this element, appellant argues that it was not precluded from competing with Surgical within Surgical‘s exclusive territory and it did not employ wrongful means in selling its inventory of Acumed products after Acumed terminated its relationship with it. Appellees counter this argument by pointing to evidence that they believe shows that appellant illegitimately acquired Acumed products. Moreover, appellees contend that even if appellant acquired the Acumed products legitimately, appellant
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 interfеrence claim. See Brokerage Concepts, 140 F.3d at 531 (citing DP-Tek, Inc. v. AT & 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.
In our case, the jury, in an unappealed determination, found that appellees did not prove their cause of action predicated on appellant‘s allegedly fraudulent conduct. Appellees thus did not establish that appellant was independently liable to them for that conduct. In this regard, we note that although appellees submitted documentary and testimonial evidence of a dispute between appellant and Acumed over inventory after the Advanced-Acumed contractual relationship ended in 2001, the jury rejected appellees’ allegations that appellant was liable to Acumed on theories of conversion, breach of contract, and unjust enrichment based on
In view of the jury‘s determination that the evidence did not support a verdict that appellant‘s conduct was independently actionable, we conclude as a matter of law that the tortious interference verdict cannot stand against appellant, even if without the adverse verdict appellees’ case would have survived appellant‘s Rule 50(b) motion. In reaching that conclusion, we have not overlooked appellees’ allegation set forth in an amendment to its complaint that during the time appellant was Acumed‘s exclusive sales representative, Morris secretly formed Allied to buy products directly from Acumed and resell them to their users. Rather, we conclude that the allegation cannot save appellees’ verdict on the tortious interference with contractual relationships claim because the jury did not find that appellant‘s conduct through Allied constituted fraudulent misrepresentation. Finally, appellees’ Lanham Act charge against appellant cannot save their tortious inference claim because the jury did not find that appellant violated federal trademark laws through its sales of Acumed products. In short, appellees do not direct our attention to any claim that appellant engaged in legally actionable conduct which the jury did not reject at the trial. It therefore follows that appellees did not establish that appellant‘s actions in interfering with their contracts were not justified.
In reaching our conclusion that appellant is entitled to a judgment as a matter of law on the tortious interference claim because the jury found that appellant‘s conduct was not independently actionable, we have considered Mosley v. Wilson, 102 F.3d 85 (3d Cir. 1996), and Boyanowski v. Capital Area Intermediate Unit, 215 F.3d 396 (3d Cir. 2000). In Mosley, we held that the district court erroneously granted judgment as a matter of law to resolve a jury‘s legally inconsistent verdicts. The plaintiff in Mosley sued the defendant, a police officer, under
On the plaintiff‘s appeal, we found that the district court erred as a matter of law in reversing the jury‘s verdict on the malicious prosecution claim merely because the verdict was inconsistent with the jury‘s verdict on the civil rights claim. Id. at 91. First, we noted that the
Next, looking to Justice Stevens’ dissent in City of Los Angeles v. Heller, 475 U.S. 796, 106 S.Ct. 1571 (1986) (per curiam),12 we outlined four approaches that a district court may take when facing an inconsistent verdict: a court may (1) allow an apparently inconsistent verdict to stand;13 (2) read the verdict
Notwithstanding Mosley, four years later we held that a judgment as a matter of law was the proper remedy where a jury reached an internally incompatible verdict in a civil conspiracy case, though we did not cite Rule 50(b). Boyanowski, 215 F.3d at 407. Boyanowski involved two separate jury verdicts in favor of a husband and wife in their respective suits against a local government and its officials. Dorothy Boyanowski alleged that the defendant, CAIU, conspired to tortiously interfere with her contractual rights. Id. at 398. The jury found in her favor on her civil conspiracy complaint while rejecting her claim for tortious interference. The district court entered judgment for Dorothy Boyanowski on the conspiracy claim and for the CAIU on the tortious interference claim. On appeal, we reversed and
Clearly, Boyanowski is more analogous than Mosley to the present case. Appellant in this case was entitled to a judgment as a matter of law not solely, if at all, because the verdict was internally inconsistent, as in Mosley, but rather because the verdict for tortious interference against the appellant cannot stand without appellees showing that appellant had committed a particular underlying tort, precisely what we held that Boyanowski required. That is, it is not that some element of the jury‘s fraud finding is legally irreconcilable with an element of the tortious interference with contractual
Moreover, it is important to recognize that in one respect this case presents even more compelling circumstances for granting appellant a judgment as a matter of law than the circumstances did in Boyanowski, because in Boyanowski we did not suggest, as we will here, that strange as it may seem, an improper jury instruction could have cured any inconsistency problem. Here, the Court did not instruct the jury, as it should have done, that if the parties are competitors, it must find that appellant engaged in independently actionable conduct for it to find in favor of appellees on the tortious interference claim. Thus, the Court‘s charge allowed the jury to return a verdict for appellees on the tortious interference claim without making a finding that appellant engaged in independently actionable conduct, a conclusion that the jury rejected.15 Therefore,
We have not overlooked appellees’ attempt to support the verdict on the tortious interference claim by relying on the jury‘s rejection of appellant‘s counterclaim for breach of contract. In this regard, appellees contend that the verdict establishes that appellant did not lawfully possess Acumed‘s inventory. We recognize that it certainly is true that if the jury had accepted as accurate appellant‘s version of the contract between Acumed and Advanced, then appellant would have had a valid reason to retain the Acumed inventory. However, the jury‘s verdict against appellant on its breach of contract counterclaim does not prove the contrapositive: that appellant did not legitimately possess Acumed inventory after the termination of the Advanced-Acumed Agreement. Indeed, as noted abоve, the jury specifically rejected appellees’ conversion claim based on appellant‘s failure to return its Acumed inventory. Thus, though
Appellees assert that even if appellant acquired the products legitimately, appellant was aware of the customs and practices of the surgical supplies industry, which include an expectation that hospitals and surgeons will purchase surgical products and tools from authorized dealers. Consequently, appellees contend that appellant should not have made the 25 Acumed sales from its inventory after it no longer was an Acumed authorized representative. While appellant may not have honored the “customs and practices” of the industry, that conduct, in and of itself, does not violate any principle of
Likewise, appellees’ argument that appellant knew it would be displacing Surgical in making potential sales is not independently actionable. To the contrary, the Restatement encourages a stranger to a relationship to engage in such conduct:
One‘s privilege to engage in business and to compete with others implies a privilege to induce third persons to do their business with him rather than with his competitors. In order not to hamper competition unduly, the rule stated in this Section entitles one not only to seek to divert business from his competitors generally but also from a particular competitor.
Restatement (Second) of Torts § 768 cmt. b (1979).
In the absence of some evidence that appellant engaged in independently actionable conduct, it is shielded from liability by the competition privilege, and thus the verdict on the tortious interference claim against it cannot stand. Therefore, viewing the evidence in the light most favorable to appellees, and even acknowledging that the evidence could support the verdict, we find that the District Court erred in not granting appellant‘s motion for judgment as a matter of law on appellees’ tortious interference with existing or prospective contractual relationships claim. Our disposition of this claim requires that we reverse the judgment for both the compensatory and punitive
Finally, on this competition point we observe that our opinion does not preclude Acumed from protecting the market for its products. Quite the contrary is true, for Acumed was free to notify Pennsylvania and New Jersey hospitals and surgeons that Surgical was its exclusive representative and urge potential customers not to buy any Acumed products from unauthorized dealers. In fact, it took that step when it sent letter notifications to its customers advising them to deal with its authorized representative.19
In a manner in harmony with the verdict, the District Court in its May 21, 2007 order, at appellees’ request enjoined appellant from selling its remaining inventory of Acumed products. Of course, for a court to grant an injunction, it is “essential that the activity sought to be restrained is actionable.” Maritrans GP Inc. v. Pepper, Hamilton & Scheetz, 602 A.2d 1277, 1283 (Pa. 1992) (quotations and citation omitted). In view of our result, it necessarily follows that because appellant‘s sale of Acumed products was not actionable, the injunction against it cannot stand. Accordingly, we will reverse the District Court‘s order granting the injunction prohibiting appellant from selling Acumed products.20
B. The Best Evidence Rule
Appellant challenges several of the District Court‘s evidentiary rulings.21 First, appellant argues that the District
Appellant argues that because the contracts with other suppliers were not at issue in this litigation, the District Court erred in barring Morris‘s testimony under
[E]ven where the substantive law does not make the contents of a writing, recording, or photograph a primary issue, evidence of those contents may still be relevant. This is true where pertinent
events occurred independent of a writing, recording, or photograph but are nonetheless evidenced by the contents of such an item. Rule 1002 applies if evidence of those contents is offered.
31 Charles Alan Wright & Victor James Gold, Federal Practice and Procedure § 7184, at 388 (2008).
The best evidence rule clearly applied to Morris‘s testimony regarding buy-out clauses contained in appellant‘s contracts with other manufacturers and suppliers, as the clauses would have been relevant in this litigation only if they tended to support Morris‘s testimony that appellant insisted on a buy-out clause in all of its representation contracts and thus did so in its contract with Acumed. Therefore, inasmuch as the best evidence rule applied, the District Court did not abuse its discretion in barring Morris‘s testimony regarding the contents of contracts not submitted into evidence or even produced for review at the trial.22
Similarly, appellant‘s argument that the District Court erroneously allowed appellees to introduce speculative
C. Summary Judgment Procedure
Appellant challenges the District Court‘s March 6, 2007 summary judgment order dismissing the institution of groundless litigation, defamation, and unlawful restraint of trade portions of counterclaim IV. It argues that the District Court did not follow the procedural requirements required for the granting of summary judgment inasmuch as it directed the parties to submit letter briefs in lieu of formal summary judgment motions, which it did not permit. In appellant‘s view, the letter briefs, even when combined with subsequent oral argument, did not provide it with a full and fair opportunity to support its claims before the District Court granted summary judgment rejecting its claims.
Appellant asserts that the District Court, during a telephone conference on February 6, 2007, requested that the parties file letter briefs on any issue they wished to raise in dispositive motions. According to appellant, the District Court
In reviewing appellant‘s summary judgment procedure contentions, we start with the principle that “[i]t has long been established that, under the right circumstances, district courts are entitled to enter summary judgment sua sponte.” Gibson v. Mayor & Council of Wilmington, 355 F.3d 215, 222 (3d Cir. 2004). A court, however, must provide the parties with notice of its intention to considеr granting summary judgment so that they have an opportunity to marshal evidence on the motion for submission to the court. See Bradley v. Pittsburgh Bd. of Educ., 913 F.2d 1064, 1069-70 (3d Cir. 1990). Our review of the parties’ letter briefs leads us to conclude that the parties treated
It is entirely appropriate for courts to recognize a procedure allowing them to grant summary judgment on their own initiative, for courts’ resources are limited and they should not be required to use those resources to conduct an unnecessary trial merely because a party entitled to a summary judgment in whole or in part does not seek that outcome to litigation. Yet we have been clear that “the sua sponte grant of summary judgment, without giving notice to the parties, is not the preferred method by which to dispose of claims.” Gibson, 355 F.3d at 224. Moreover, as we emphasized in Bradley, it is important that before a court grants summary judgment on its own initiative it give notice to the parties that it is considering doing so and that it give the parties the opportunity to marshal evidence and make arguments on whether the court should grant summary judgment. We think that in this case it is doubtful that the
In making a harmless error analysis we point out that appellant filed its briеf on this appeal using materials bearing on the issues raised on this appeal that were not part of the record, but has sought to expand the record to include these materials. Nevertheless, as we further explain below, even if we considered for use on the merits the materials appellant seeks to add to the record, we would affirm the District Court‘s order to the extent that it granted summary judgment against appellant on portions of its counterclaim. Appellant‘s brief makes clear that it predicates its objection to the grant of summary judgment on “Advanced [being] denied a full and fair opportunity to defend its claims, in violation of its rights to due process.” Appellant‘s br. at 61 (emphasis in original). It thus follows that if upon exercising plenary review, as we are on appellant‘s appeal from the granting of summary judgment against it, we would affirm the District Court‘s order to the extent that it granted summary judgment against appellant on its counterclaim even considering all of the materials with which appellant seeks to supplement the record and has placed in the appendix, then the procedure in the District Court could not have been prejudicial to appellant.
Furthermore, there is an even more fundamental reason why the error, if there was one in the summary judgment procedure, was harmless, namely that for the reasons we set forth with respect to summary judgment, appellant‘s
D. The Merits of Counterclaim IV
Appellant asserts that the District Court erred in granting summary judgment and dismissing counterclaim IV to the extent that it did. We reject this contention as we agree with appellees that counterclaim IV is a “mish-mash of multiple claims,” appellees’ br. at 57, some of which appellant did not present properly to the District Court and none of which is meritorious.
Appellant makes the following arguments under the rubric of counterclaim IV: (1) appellees instituted the Lanham Act claim in order to “manufacture federal jurisdiction” as well as to tortiously interfere with appellant‘s contracts with other medical suppliers; (2) during the litigation, appellees used depositions to impugn appellant‘s reputation and to injure appellant‘s relations with other medical products suppliers,
As we indicated above, in considering appellant‘s arguments on this appeal, we have taken into account appellant‘s motion to supplement the record with various documents not in the District Court record but in the appendix and, even though we have not granted that motion, we nevertheless have considered that evidence.24 We have taken
1. The record on appeal
The first indication to us that there was a problem with the record on the appeal came when, after appellant filed its brief and appendix, appellees filed a motion requesting that we strike all material outside of the District Court record from the appendix. Only then, in response, did appellant file a motion to include in the record on appeal additional documents that it considered to be relevant and material to the issues on appeal that were not part of the District Court record. We grant appellees’ motion and deny appellant‘s motion.
It is established that although “[t]he only proper function of a court of appeals is to review the decision below on the basis of the record that was before the district court,” Fassett v. Delta Kappa Epsilon, 807 F.2d 1150, 1165 (3d Cir. 1986), in exceptional circumstances a court of appeals may allow a party to supplement the record on appeal. We listed what these circumstances might be in In re Capital Cities/ABC Inc.‘s Application for Access to Sealed Transcripts, 913 F.2d 89, 97 (3d Cir. 1990) (citing Ross v. Kemp, 785 F.2d 1467, 1475 (11th Cir. 1986)), as follows:
(1) whether the proffered addition would establish beyond any doubt the proper resolution of the pending issue; (2) whether remanding the case to the district court for consideration of the additional material would be contrary to the interests of justice and the efficient use of judicial resources; and (3) whether the appeal arose in the
context of a habeas corpus action.25
None of the circumstances we listed in Capital Cities is present in this case. Here, the documents that appellant wishes to submit for our consideration do not establish beyond doubt, or indeed even under the less demanding showing that a party must make in opposing summary judgment, that the District Court‘s rulings on its summary judgment disposition were incorrect. Thus, taking into account the record as appellant wishes it to be, we would affirm the order for summary judgment.26 Therefore, in considering the appeal from the
2. Instituting Groundless Litigation, Defamation and Unfair Competition28
Under Pennsylvania law, a plaintiff bringing a defamation action must prove: (1) the defamatory character of the communication; (2) its publication by the defendant; (3) its application to the plaintiff; (4) the understanding by the recipient of its defamatory meaning; (5) the understanding by the recipient of it as intended to be applied to the plaintiff; (6) special harm resulting to the plaintiff from its publication; and (7) abuse of a conditionally privileged occasion.
Appellant relies on Restatement (Third) of Unfair Competition § 1 to support its unfair competition allegation but does not cite any state-court appellate decision that has adopted section 1 in Pennsylvania. Nevertheless, inasmuch as we reject appellant‘s section 1 contentions, we will assume without deciding that Pennsylvania courts would follow that section.29
Section 1 states, in relevant part, that:
One who causes harm to the commercial relations of another by engaging in a business or trade is not subject to liability to the other for such harm unless:
(a) the harm results from . . . acts or practices of the actor determined to be аctionable as an unfair method of competition, taking into account the nature of the conduct and its likely effect on both the person seeking relief and the public; or
(b) the acts or practices of the actor are actionable by the other under federal or state statutes . . . or general principles of common law apart from those considered in this Restatement.
Appellant maintains that in the incident in December 2004 that we already have described, a Surgical sales representative “loudly accused” Advanced‘s sales representative of illegally selling Acumed products at Nazareth Hospital. According to appellant, the Nazareth Hospital incident led Dr. Robert Frederick, a Nazareth doctor, to stop doing business with appellant and also resulted in Morris‘s exclusion from the
Further, the letters Acumed sent to appellant‘s customers, despite appellant‘s view that they “disparage[d] the inventory Advanced was selling,” appellant‘s br. at 18, do not qualify as defamation or unfair competition. The letters informed Acumed‘s customers—without mentioning appellant by name—that Acumed only would insure and warrant products its authorized dealers sold and further informed its customers that Surgical was its authorized representative in eastern Pennsylvania and southern New Jersey. Thus, inasmuch as the letters did not specifically name appellant and were not defamatory under Pennsylvania law, the District Court appropriately granted appellees summary judgment on this claim. Likewise, because Acumed‘s conduct in sending the letters was not actionable but rather was justified, the letters did not constitute unfair competition.
Appellant argues that certain questions that appellees’
Finally, appellant contends that Acumed pleaded a Lanham Act claim in order to “manufacture federal jurisdiction.”31 Appellees’ Lanham Act claim survived appellant‘s pretrial motion seeking an order dismissing the case for want of federal jurisdiction, but the jury rejected the Lanham Act claim at trial. We believe that in alleging that appellees instituted groundless litigation, appellant was attempting to bring a malicious prosecution claim under Pennsylvania law and, in any event, we see no other way to treat the claim. In Pennsylvania, a party engages in malicious prosecution when it institutes a lawsuit with a malicious motive and without probable cause. Werner v. Plater-Zyberk, 799 A.2d 776, 785
3. Tortious Interference with Contractual Relationships
We already have discussed Pennsylvania‘s requirements for a tortious interference with contractual relationships claim when considering appellant‘s appeal from the judgment in favor of appellees on their similar claim, and thus we do not repeat them here. We find that the District Court did not err in granting appellees a judgment as a matter of law on this portion of counterclaim IV, inasmuch as appellant did not present any evidence of conduct that could have led a reasonable jury tо conclude that appellees interfered with appellant‘s contracts.
Appellant based its tortious interference counterclaim on the same incidents that it alleges constituted defamation: the Nazareth Hospital incident and Acumed‘s letters to its customers. To the extent that appellant claims that Acumed‘s
E. Attorneys’ Fees
After the jury‘s verdict, appellant filed two motions for attorneys’ fees. First, appellant sought to recover attorneys’ fees from appellees based on the non-disclosure provision of the RMW Agreement, as appellant believed that appellees contended that the non-disclosure provision had been included in the Advanced-Acumed Agreement. The RMW Agreement non-disclosure provision recited that “[i]f any action at law or inequity [sic] is brought to enforce or interpret the provisions of this Agreement, the prevailing party in such action shall be entitled to reasonable attorney‘s fees.” App. at 3534. Appellant reasons that because appellees unsuccessfully sued it for breach of the non-disclosure agreement from the RMW Agreement Acumed contended was incorporated in the Advanced-Acumed
It appears that even though Acumed predicated its breach of contract claim on a non-disclosure agreement, it did not introduce physical evidence of an agreement between the parties to this case and did not allege in its pleadings that the RMW Agreement and the Advanced-Acumed Agreement were identical.34 The existence of an attorneys’ fees provision was not at issue during the trial. Therefore, we cannot know from Acumed‘s allegations and evidence whether any non-disclosure agreement it might have had with appellant contained an attorneys’ fees provision. On the other hand, appellant
Appellant predicated its second claim for attorneys’ fees under the Lanham Act, which authorizes an award of attorneys’ fees to a prevailing party in “exceptional” cases.
F. Contempt Order
Appellant argues that the District Court should not have entered the contempt of court order because the Court previously had denied appellant‘s request for access to appellees’ financial records, stating that it would deal with the issue after the trial was over. Appellant also contends that the District Court set an unreasonably short time for it to produce the documents.
Appellant, however, was on notice when appellees served subpoenas on Advanced and Morris on March 12, 2007, and March 16, 2007, requiring them to produce financial records. Moreover, as the District Court reasoned, the parties knew that the net worth issue could be litigated and presented to the jury at the end of the liability aspects of the trial because both sides asked for punitive damages. In these circumstances, the District Court did not abuse its discretion in finding appellant in contempt of court for non-compliance with the March 21, 2007 order.35 See Armstrong v. Guccione, 470 F.3d 89, 101-02 (2d Cir. 2006) (quoting Shillitani v. United States, 384 U.S. 364, 370, 86 S.Ct. 1531, 1535 (1966)) (“There can be no question that courts have inherent power to enforce compliance with their lawful order through civil contempt.“).
V. CONCLUSION
For the foregoing reasоns, we conclude that the District Court erred in denying appellant‘s motion for judgment as a matter of law on the tortious interference with contractual relationships claim. 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. We will affirm all of the District Court‘s other orders from which appellant has appealed, including the Court‘s orders on attorneys’ fees, summary judgment, judgment as a matter of law on appellant‘s counterclaims, and evidentiary issues, as well as the order of March 22, 2007, holding appellant in contempt of court. The parties will bear their own costs on this appeal.
I join Judge Greenberg‘s well-crafted and in-depth opinion. I mention two more matters, not necessary to the outcome of this case, that I nonetheless deem of concern.
The jury‘s initial compensatory award to Acumed of $0 reflected the conclusion, mentioned in note 17 of Judge Greenberg‘s opinion, that Acumed cannot prove the “actual legal damage” necessary to establish tortious interference with contractual relationships. Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494, 530 (3d Cir. 1998). By denying Acumed compensatory damages, the jury indicated that Acumed had not shown “the loss of the benefits of the contract or prospective relation[,] or consequential, emotional or reputational losses[,] resulting from the defendant‘s conduct” required to satisfy Pennsylvania‘s description of tortious interference with existing or prospective contractual relations. Pawlowski v. Smorto, 588 A.2d 36, 40 (Pa. Super. Ct. 1991) (applying and interpreting § 774A of the Restatement (Second) of Torts); see also Birl v. Phila. Elec. Co., 167 A.2d 472, 474 (Pa. 1960). Accordingly, even if the District Court had been correct in determining that Acumed had satisfied the other elements of the tort, it should have granted appellant judgment as a matter of law on the basis of Acumed‘s failure to establish actual damages. See Bruce Lincoln-Mercury, Inc. v. Universal C.I.T. Credit Corp., 325 F.2d 2, 22 (3d Cir. 1963); 21 Stuart M. Speiser, et al., The American Law of Torts § 31:94 (1992).
First, I believe that Pennsylvania law does not permit nominal damages for tortious interference violations. Section 907 of the Restatement (Second) of Torts defines nominal damages as “a trivial sum of money awarded to a litigant who has established a cause of action but has not established that he is entitled to compensatory damages.” Pennsylvania courts have interpreted this definition to permit nominal damages only in tort cases “where harm is not a requisite to the cause of action.” Carter v. The May Dep‘t Store Co., 853 A.2d 1037, 1041 (Pa. Super. Ct. 2004). But, as stated, harm is a required element of tortious interference with existing or prospective contractual relationships. See Pawlowski, 558 A.2d at 40; Pelagatti v. Cohen, 536, A.2d 1337, 1343 (Pa. Super. Ct. 1987), appeal
Second, even if an award of nominal damages were permitted, the District Court should not have done so here. As discussed in Judge Greenberg‘s opinion, the trial court could have taken a number of approaches once it learned that the general verdict and jury answers were inconsistent. But regardless of its chosen approach, it was required to apply Pennsylvania law that holds “that no award for punitive damages may be made where actual damage has not been suffered.” Hilbert v. Roth, 149 A.2d 648, 652 (Pa. 1959); see also Smith v. Grab, 705 A.2d 894, 901 (Pa. Super. Ct. 1997); Sulecki v. Southeast Nat‘l Bank, 516 A.2d 1217, 1219 (Pa. Super. Ct. 1986). Thus, instead of resolving the inconsistent verdict by instructing an award of nominal damages, the Court should have entered a judgment vacating Acumed‘s punitive damages award. Cf. Cooper Distrib. Co., Inc., v. Amana Refrigeration, Inc., 63 F.3d 262, 281-84 (3d Cir. 1995) (vacating a punitive damages award for tortious interference
Third, the District Court‘s instruction did nothing to counter the quick conclusion that the compensatory/punitive award ratio (1/100,000) here was untenable under Pennsylvania law, see Reading Radio, Inc. v. Fink, 833 A.2d 199, 214 (Pa. Super. Ct. 2003) (“[A] reasonable relatiоnship must still exist between the nature of the cause of action underlying the compensatory award and the decision to grant punitive damages.“), and constitutional standards, see State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003) (“[I]n practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.“).
In sum, the jury‘s initial decision not to grant Acumed a compensatory award for actual damages ends the game for it. Tortious interference with existing or prospective contractual relations cannot be found, and thus punitive damages are not available. Instructing the jury to award $1 in compensatory damages was an unfitting effort to change these results, and the compensatory/punitive award ratio it created was off the chart of reasonableness.
Notes
App. at 4121.15. Do you find by a preponderance of the evidence that Advanced and/or Morris intentionally interfered with the plaintiff‘s
existing or prospective contractual and business relationships with plaintiff‘s customers? . . . .
17. Do you find that the plaintiffs are entitled to an award of punitive damages as a result of defendants’ interference with plaintiffs’ contractual relations?
These questions merged interference with existing contractual relationships and interference with prospective contractual relationships into one tort, seemingly violating the general rule that verdict slips should “avoid questions that combine two issues disjunctively because a ‘yes’ or ‘no’ answer may refer to either issue.” 9A Wright & Miller, Fed. Practice & Procedure § 2508, at 189 (1995). They also grouped Acumed and Surgical together even though their contractual interests and claimed damages were different. Nevertheless, considering our overall conclusion in this case, the possible errors in the charge that we identify were harmless to appellees against whom we are holding on this appeal from their favorable tortious interference judgment, and even if they objected at trial on the basis of these errors, we would not order a new trial by reason of the form of the verdict.
102 F.3d at 90 (internal citations omitted). Nevertheless there are several reasons why the foregoingthe inappropriateness of entering judgment as a matter of law solely on the basis of inconsistent verdicts is evident [because a] motion for judgment as a matter of law rendered after trial must be made on grounds that were previously asserted in a motion for directed verdict prior to submission of the case to the jury [and o]bviously the inconsistency of the verdicts could not have been raised in a motion for directed verdict prior to jury deliberations.