Opinion
CASE NO. 8:10-CV-2577-T-17, CASE NO. 8:10-CV-2688-T-17.
September 21, 2011
ORDER
This cause is before the Court on:
Dkt. 1 Bankruptcy Record Dkt. 2 Bankruptcy Record Dkt. 3 Bankruptcy Record Dkt. 4 Bankruptcy Record Dkt. 5 Bankruptcy Record Dkt. 6 Bankruptcy Record Dkt. 7 Bankruptcy Record Dkt. 8 Bankruptcy Record Dkt. 9 Bankruptcy Record Dkts. S-1 — S-4 Dkt. 12 Appellants' Brief (Maxxim and Medline) Dkt. 22 Appellees' Brief in Response and Opening Brief of Cross-Appellants (PHS and McCauley) Dkt. 25 Bankruptcy Record Dkt. 26 Appellants' Reply Brief and Response to Cross-Appeal (Maxxim and Medline) Dkt. 31 Cross-Appellants' Reply Brief in Support of Cross-Appeal (PHS and McCauley) Dkt. 35 Appellants' Reply Brief (PHS and McCauley) (Consolidated Appeal) Dkt. 1 Bankruptcy Record Dkt. 2 Bankruptcy Record Dkt. 3 Bankruptcy Record Dkt. 4 Bankruptcy Record Dkt. 5 Bankruptcy Record Dkt. 6 Bankruptcy Record Dkt. 7 Bankruptcy Record Dkt. 8 Bankruptcy Record Dkt. 9 Bankruptcy Record Dkt. 10 Bankruptcy Record Dkts. S-1 — S-4 Dkt. 14 Appellants' Brief (PHS and McCauley) Dkt. 17 Appellee's Brief (Maxxim and Medline) In Case No. 8:10-CV-2577-T-17, Appellants Maxxim Medical, Inc. ("Maxxim") and Medline Industries, Inc. ("Medline") have appealed the Findings of Fact and Conclusions of Law and Final Judgment entered in Bankruptcy Court on March 31, 2010, and the Order Denying Plaintiffs' Motion to Amend Findings and Judgment dated June 25, 2010.Appellees Professional Hospital Supply, Inc. ("PHS") and Karen McCauley ("McCauley") have cross-appealed the Findings of Fact and Conclusions of Law and Final Judgment entered in Bankruptcy Court on March 31, 2010, and the Order Denying Plaintiff's Motion to Amend Findings and Judgment dated June 25, 2010.
Case No. 8:10-CV-2688-T-17 was consolidated with Case No. 8:10-CV-2577-T-17 for all purposes. (Dkt. 34).
In Case No. 8:10-CV-2688-T-17, Appellants Professional Hospital Supply, Inc. and Karen McCauley appeal the Order on Defendants' Motion for an Award of Costs and Fees entered in Bankruptcy Court on August 19, 2010.
I. Background
Maxxim Medical Group, Inc. filed a Chapter 11 petition in the United States Bankruptcy Court for the Middle District of Delaware on February 11, 2003. Maxxim commenced an adversary proceeding, Case No. 03-10438-PJW, by filing an Adversary Complaint for Injunctive Relief and for Damages against Professional Hospital Supply, Inc. and Karen McCauley. The Complaint included the following claims:
Count I: Breach of Contract Karen McCauley Count II: Breach of Contract Karen McCauley Count III: Breach of Fiduciary Duty Karen McCauley Count IV: Aiding and Abetting Breach Of Fiduciary Duty PHS Count V: Tortious Interference with Contract And Advantageous Business Relations Both Defendants Count VI: Violation of Uniform Trade Secrets Act Both Defendants Count VII: Unfair Competition Both Defendants Count VIII: Declaratory Judgment of Violation of Sec. 362(a)(3) PHS In Counts I, II, III, IV, V.VII, and VIII, Maxxim sought compensatory damages in an amount to be determined at trial, and an injunction. In Count VI, Maxxim sought the award of an amount by which PHS and McCauley had been unjustly enriched. In Count VIII, Maxxim also sought the award of attorney's fees and costs.Medline moved to intervene in the Adversary Proceeding as a creditor. Medline was one of the purchasers of the assets of Maxxim in October, 2003. After a hearing, the Bankruptcy Court granted Medline's Motion to Intervene on March 15, 2004.
The Adversary Proceeding was scheduled to go to trial in Delaware in 2004. However, the parties filed numerous motions, among them a Motion to Transfer the case to the Middle District of Florida, which was granted.
After disposition of summary judgment motions, the Bankruptcy Court for the Middle District of Florida conducted a twenty-six day trial of this case, over a period of six months (10/17/2005-3/20/2006) (Findings of Fact, note 2), generating a trial transcript of 5,000 pages, +/-, not including the voluminous trial exhibits and other documents designated by the parties.
The Bankruptcy Court entered Findings of Fact and Conclusions of Law, and a Final Judgment in favor of PHS and McCauley, on March 31, 2010. Maxxim and Medline moved to amend the Findings and Judgment on 4/13/2010, which was denied. PHS and McCauley filed a Bill of Costs and a Motion for the Award of Costs and Fees as prevailing parties. The Bankruptcy Court conducted a hearing on the Motion for the Award of Costs and Fees on 7/19/2010, and entered an Order granting the Motion for Award of Costs and Fees on 8/19/2010, in which the Bankruptcy Court granted the award of certain costs, but denied the award of attorney's fees. This appeal followed.
II. Standard of Review
The Court reviews the factual findings of the Bankruptcy Court for clear error, and the resolution of legal questions de novo. A factual finding is clearly erroneous when, although there is evidence to support it, "the reviewing court is left with the definite and firm conviction that a mistake has been committed."Proudfoot Consulting Co. v. Gordon, 576 F.3d 1223, 1230 (11th Cir. 2009).
Denial of injunctive relief is reviewed under the "abuse of discretion" standard. Kidder, Peabody Co. v. Brandt, 131 F.3d 1001, 1003 (11th Cir. 1997). Determinations of law made in reaching the decision to deny the injunctive relief are reviewedde novo. Id., at 1003. Under the abuse of discretion standard, a court is allowed a range of choice in reaching its decision and the decision shall be affirmed unless the court "applied the wrong law, followed the wrong procedure, relied on clearly erroneous facts, or committed a clear error in judgment." United States v. Brown, 15 F.3d 1257, 1264-65 (11th Cir. 2005).
III. The Findings of Fact and Conclusions of Law of the Bankruptcy Court
The Bankruptcy Court included detailed Findings of Fact, identifying the parties, and explaining: 1) McCauley's sales representative agreement ("SRA") with Maxxim; 2) McCauley's employment by Maxxim; 3) Custom Procedure Trays ("CPTs"); 4) how CPTs are designed and constructed; 5) bill of materials ("BOMs"); 6) how sales representatives and hospital customers use BOMs; 7) Maxxim's CTMS system; 8) Maxxim's CAD/CAM software; 9) Maxxim's GPO agreement with Novation; and 10) the various causes of Maxxim's loss of Maine business.
In the Conclusions of Law, the Bankruptcy Court included conclusions of law as to jurisdiction, the overall issue of causation, each individual count of the Adversary Complaint, and as to Maxxim's and Medline's request for injunctive relief. The Bankruptcy Court concluded that Maxxim suffered no damages as a result of McCauley's actions, the loss of Maine business was due to other factors and was not caused by PHS or McCauley. The Bankruptcy Court denied Maxxim's and Medline's request for injunctive relief. The Bankruptcy Court entered a separate final judgment in favor of PHS and McCauley.
A) Restrictive Provisions of SRA
The SRA includes the following provisions:
11. Covenant Not to Compete. The Representative acknowledges and recognizes the highly competitive nature of the Company's business and that such business constitutes a substantial asset to the Company having been developed through considerable time, money and effort. Accordingly, the Representative agrees to the following: The Representative shall not, during the term of this Agreement or any renewal thereof, or for the period of one (1) year after the expiration or termination of this Agreement (the "Restricted Period"), for any reason, individually or with others, directly or indirectly, (i) engage in a Competing Business within the Territory, including but not limited to the Rendering of services to any Competitive Business within the Territory for any person or entity other than the Company; (ii) have any interest in, directly or indirectly, any corporation, partnership, joint venture, trust or other business entity, or enter into a service agreement with, or the employ of, or act as agent or independent contractor to, any other person, firm, corporation or other entity engaged in a Competitive Business within the Territory; or (iii) recruit, solicit or otherwise influence any employment (sic) or agent of the Company to discontinue such employment or agency relationship with the Company. Notwithstanding the foregoing, the Representative may accept employment with a Competing Business after the termination or expiration of this Agreement is (sic) such Competing Business is diversified and which is, as to that part of its business in which the Representative accepts employment, not a Competing Business; provided however, that prior to the Representative's employment with a Competing Business, the Representative shall deliver to the Company separate written assurances satisfactory to the Company from such Competing Business and from the Representative that the Representative will not render services directly or indirectly, in connection with any Competing Product. This provision shall survive the earlier termination or expiration of this Agreement for a period of one (1) year.
12. Ownership of Customers and Accounts. The Representative acknowledges that, as a result of the Company's efforts and reputation, the Company has developed, and has a substantial relationship with, a substantial base of existing and potential customers, (the "Customer Base") throughout the state of Maine. The Representative acknowledges that the Customer Base is the sole and exclusive property of the Company and that all title to client records and information is and shall remain the sole property of the Company. The Representative shall not access the Customer Base except to fulfill the purposes, terms and provisions of this Agreement. The Representative acknowledges and confirms to the Company that any customer with whom the Representative communicates in any way during the term of this Agreement shall be deemed part of the Company's Customer Base, and that upon termination or expiration of this Agreement, shall not solicit, induce or influence any customer in the Customer Base at any time during the Restricted Period to discontinue or reduce the extent of such relationship with the Company, or to conduct business, directly or indirectly, with the Representative or any corporation, partnership, joint venture, trust, or other business entity with which the Representative may be affiliated.
13. Non Disclosure of Information. The Company acknowledges that the Company's trade secrets, procedures, methods and ideas, market research data or analyses, marketing plans, customer lists and information concerning the Company's products, services, training methods, development, technical information, marketing activities and procedures, and corporate strategies, credit, insurance and other data concerning the Company's Customer Base, as it exists from time to time (the "Proprietary Information") are valuable, special and unique assets of the Company, access to and knowledge of which are essential for the performance of the Representative's duties as an independent contractor of the Company. In light of the highly competitive nature of the industry in which the Company's business is conducted, the Representative agrees that all Proprietary Information shall be considered confidential and shall not be disclosed by him to anyone outside the Company without the Company's permission, except as required by applicable law, and in such case, upon prior notice to the Company so that the Company may take the appropriate measures to protect such information. Upon termination or expiration of his independent contractor relationship with the Company; (i) the Representative agrees to return promptly all documents (including, without limitation, identical or non-identical copies of such documents and documents stored upon electronic media or other means) in his possession which contain Proprietary Information; and (ii) the Representative shall not retain any copies or reproductions of correspondence, memoranda, reports, notebooks, drawings, photographs, or other documents relating in any way to the affairs of the Company or the affairs of its affiliated companies and which are entrusted to the Representative at any time during the term or any renewal term of this Agreement. This provision shall survive the earlier termination or expiration of this Agreement.
B) Causation
As to the issue of causation, the Court notes the following testimony of some of Maxxim's former CPT customers. Maxxim had other CPT customers within the State of Maine. In terms of the amount of sales revenue, Maine Medical Center, Penobscot Bay Medical Center, Central Maine Healthcare and St. Joseph's Hospital — Bangor were significant customers.
Thomas Guare is the director of materials management for Maine Medical Center; he is also the director of supply chain management for Maine Health, the parent of Maine Medical Center. Sanford Whitney is the director of materials management for Penobscot Bay Medical Center. Steven Gauthier is the regional director of material services for Central Maine Healthcare. Derrill Maynard is the director of materials management for St. Joseph Hospital — Bangor.
All references are to the volume number and page number(s) of trial transcript.
1) Maine Medical Center-Thomas Guare
2) Penobscot Bay Medical Center — Sanford Whitney
Q. Well, you do know that Medline was one of the approved Novation CPT suppliers starting January 1, 2003, do you not?
A. Yes, I do. (11:66).
. . . .
Q. And you don't recall him coming to see you and Mike Gobealle in February 2003 with a possibility of switching business to Medline for CPTs?
A. I do not recall that although Medline at that point was a player and they're on the Novation contract for CPTs and were not eliminated then-by that point.
Q. Well, they were never-they never received-Medline never received an RFP you testified.
A. That's correct. But there was a decision made by the clinical staff to not accept Medline as a vendor. That was the first step in our process was to take the vendors to the clinical staff. (11:66-67).
Q. I'm just asking for what you did, all right, not for what others did. Now, with respect to the visit by Keith White, can you recall discussing with Keith White from Medline the fact that you had already decided to award the contract to Allegiance/Cardinal?
A. I don't recall that conversation nor had I decided to award to award this to Cardinal.
Q. Uh-huh. And did you tell Keith White at this meeting that Maine Medical had in fact struck an arrangement to get discounts for other products, including pharmaceuticals?
A. Maine Medical Center did not do that, Maine Health did.
Q. So that refreshes your recollection that you discussed that with Maine —
A. I don't remember discussing this with Medline. But that-just to be correct, that is not an arrangement for Maine Medical Center, that contract that is being referred to here. That agreement is at a Maine Health level.
Q. Of which Maine Medical is a participant?
A. That's correct.
Q. So that deal with Allegiance that was struck was for Maine Health but Maine Medical also reaped some of the benefits from that; is that correct?
A. There was an incentive in an agreement we had with Cardinal so that if we did business with other parts of Cardinal besides the one that we were doing business with which was pharmacy distribution and fixes, there was an incentive or a rebate, an incentive to do business with more of the Cardinal organization. And that is in that agreement.
Q. That is what agreement?
A. That is an agreement Maine Health has with Cardinal. (11:66-67).
. . . .
Q. Okay. So back in February, 2003, it is true that this arrangement had been struck with Maine Health; is that correct?
A. That's correct. (11:67).
. . . .
Q. And those-so you had eliminated Maxxim and you had eliminated Medline, Cardinal/Allegiance and all the other people that had been approved by Novation for CPTs starting January 1, 2003, correct?
A. Correct. (11:79).
. . . .
Q. So your testimony is that you had a hallway conversation with Karen McCauley about the fact that you were thinking of switching from Maxxim to some other CPT supplier in December, 2002?
A. I did not have — that I was thinking of switching. I had a conversation with Karen McCauley that said Maxxim would no longer be part of the next RFP process and award because they were not part of Novation. (11:119).
. . . .
Q. You told her that, in essence, if she stayed with Novation (sic), she was not going to be getting any more sales on CPTs — I'm sorry, that if she stayed with Maxxim, she was not going to get any more CPT sales after the runoff.
A. All I said to her was that Maxxim was not a vendor in the next go around on CPTs at Maine Medical Center.
Q. What was her answer?
A. She understood that. She said that we had been pretty faithful to Novation.
Q. Did you discuss with her PHS at that time? (11:120)
A. No.
Q. When was the first time that you and she discussed Professional Hospital Supply, PHS?
A. I don't recall that date that we-but it was on our-we were interested in finding out about PHS as a vendor, who they were. I don't recall when I had the first conversation with Karen McCauley about PHS. (11:121).
. . . .
Q. She knew that when she was gathering the data for Maine Medical CPTs she was gathering it for use to switch off to PHS.
A. She was-no. She was gathering it to see if PHS was a viable vendor for us. (11:122)
. . . .
Q. And one reason you selected PHS was because you knew that Karen McCauley was going to be their account representative; is that correct?
A. That certainly helped. The reasons we picked PHS was at the end of our process they were the best business deal and they met our specifications. Having a good representative was also very important to us. (11:123-124).
. . . .
Q. You stated that to your recollection the RFP process started in May or June 2003?
A. The process started in Feb-March of 2003. And it's a process that we use where we meet with the clinical staff and start the process and say, "Here's the Novation contract, here are the vendors," and we move forward. (11:141).
. . . .
Q. Okay. And when was the first time that you personally participated in this process?
A. When I —
Q. In the selection process.
A. When I told Karen McCauley that Maxxim was out in December, I would say is the first time I participated. (11:142).
Q. . . . . There came a point when Penobscot Bay decided to cease purchasing CPT's from Maxxim. Can you identify for me every reason that you became aware of as chairman of the surgical procedures committee for that decision.
. . . .
A. There are several reasons. The most important reason that we elected to change was quality, and that decision upon quality was reached before this contract ended. The problems were so numerous and so chronic that the surgical products committee came to the conclusion that we were going to change vendors at the end of the VHA contract.
Another factor playing into this was the general business health of Maxxim as a company. We knew that they were in trouble. If fact, we had received a letter talking about Maxxim going into Chapter 11, and there was a lot of concern about their ability to provide product.
The last reason — the major reason for the change happened was that Maxxim did not receive an award on the new VHA contract, and we have a commitment to using VHA contracts wherever possible. The volume related to the surgical pack business was considerable for a community hospital like ourselves. It represented probably anywhere from 160 to 170,000 dollars a year. A lot of the products within those packs have rebates associated with them and are contracted products with VHA.
So it was — the fact that Maxxim didn't receive a contract award from VHA for that business in the future was the final reason. But even if they had received an award, we wouldn't have continued with Maxxim because of the quality. (15:99-100).
. . . .
Q. Did Karen McCauley influence your decision to cease purchasing CPT's from Maxxim? (15:103-104).
A. No.
. . . .
Q. As you sit here today, can you recall whether anybody whom you believe to be acting on behalf of Professional Hospital Supply, PHS, influenced your decision to cease purchasing CPT's from Maxxim?
A. No.
Q. Did Karen McCauley ever disparage any Maxxim products?
A. No.
Q. Do you recall her ever disparaging Maxxim generally?
A. No.
Q. Now, eventually Penobscot Bay decided to purchase CPT's from PHS?
A. That's correct.
Q. Can you describe the process that led to that decision?
A. We sent in an invitation to three of the awardees of the VHA contract to participate in submitting proposals and samples for our review. The three companies that we invited to participate was Professional Hospital Products, MedLine, and DeRoyal. We provided those companies with a bill of materials, and we also made available samples for their review. I, also, provided contact with my sterile processing manager at the time, Nancy Alewood. She was a former surgical scrub, so she had a very strong working knowledge of how these kits were assembled and the manner in which they were assembled. So she knew the rationale behind these kits and how they were designed.
Then we brought in all three companies. We met with all three representatives; and then as a group we went through, and we went through each one of the samples of the kits from the companies to review if they were assembled correctly, if they had the right products in there, and if they would meet our standards and that; and following a price review, we made a decision to go with Professional Health Systems.
Q. Professional Hospital Supply?
A. Hospital Supply?
Q. Why did you not select MedLine?
A. MedLine —
. . . .
Q. Let me ask it this way. What role did you play in the process?
A. I participated in the committee. I chaired the committee. I worked with the purchasing department and the clinicians to coordinate the logistics around getting not only the proposals together but, also, making sure that we had a smooth handoff here from-transition from using Maxxim products and ensuring that there was enough inventory there and assuring that we got through this process because the unique thing about this book of business is that from the time that you make the decision to the time that you're able to actually have delivery of the product can go out more than two months. And so it's a real balancing act to make sure that the supply chain doesn't get-has product available to do surgical procedures. So I played a role in monitoring that and making sure that happened.
Q. Why did the committee not select MedLine?
. . . .
A. They went through the components of MedLine. They found that the components did not meet 100 percent of their preferences, and they, also, based their decision and, perhaps, most importantly, they based their decision on the cost? MedLine-actually, MedLine was the highest of the three. DeRoyal was actually the second lowest, and then PHS was the lowest. (15:104-106).
Q. Did there come a time when you learned that Novation had identified new suppliers for the supply of CPT's?
A. Yes.
Q. Do you recall when you learned that approximately?
A. Towards the end of 2002.
Q. All right. And what was your reaction when you heard that announcement?
A. Well, our reaction was at that point to consider focusing on the new Novation suppliers.
Q. Why was that?
A. We want to participate in the group purchasing organization for two reasons: One, we hope we get better pricing as part of an aggregation of other hospitals; and two, we also get a dividend back from Novation during the year for our-based on our participation in their contracts. So we want to stick with-we want to stick with the Novation vendors if at all possible. We want to participate in that.
Q. Now, after Novation made its announcement, did Karen McCauley approach you to discuss the possibility of Maxxim providing CPTs to Central Maine after the expiration of Maxxim's contract with Novation?
A. She did.
Q. And what did she say and what did you say?
A. She offered to sign us for-she actually offered us I think it was a one or two or three year re-up or re-sign up with Maxxim. And obviously one of the things that she offered us, based on our comments, was some sort of reduction in the price or rebate to make up for the share back that we get from Novation by participating in their contracts. In a sense, she tried to make us whole financially by staying with Maxxim.
Q. Did you eventually enter into a contract with Maxxim for the supply of CPTs after the Novation announcement?
A. We did.
Q. What was the term of the contract?
A. We entered into a one-year extension of our agreement with Maxxim.
Q. What was the purpose of entering into a one-year extension?
A. Primarily at that time we were not in a position to change procedure trays because we were in the process of building a cardiac hospital attached to the Central Maine Medical Center facility. And based on the enormous amount of workload and chaos that it created, we didn't want to add another factor, namely changing custom procedure trays, so we opted to sign with them for another year.
Q. And when you opted to sign for another year, what was your then intention as to what you would do at the expiration of that year?
A. At the end of that term, we made it pretty clear we were going to be looking for the Novation suppliers. We were going to be rebating it to Novation suppliers and moving that business elsewhere.
Q. Did you convey that information to anybody?
A. Yes. We conveyed it to Karen.
Q. Did there come a time during 2003 when Central Maine in fact did engage in an RFP process for the supply of custom procedure trays?
A. Yes, there was a time during 2003 when we did that.
Q. And can you tell me approximately when that was?
A. June. May/June timeframe. Mid year.
Q. And who was invited to participate in the RFP?
A. We invited three suppliers: Cardinal, DeRoyal and PHS.
Q. Did you invite Maxxim?
A. No.
Q. Why not?
A. They weren't Novation suppliers, number one, and number two, their quality had really — it wouldn't have mattered if they were. Their quality had really fallen off during the year.
Q. Can you describe what you mean by that?
A. Maxxim began substituting different items in the pack rather than the items we were accustomed to. They also had some quality problems. We found hair in some of the packs or in one or two of the packs. There were punctures in the table covers, punctures in the outer packaging. There were quality issues. (23:20-23).
. . . .
Q. And what was your reaction to those quality issues?
A. Well, they were very disruptive to the process of providing patient care, so our reaction was obviously that we complained, we sought out credits for the trays that had failed and our reaction, you know, it sort of solidified the fact that we weren't going to be looking at them any further.
Q. And you made that determination sometime during the summer of 2003?
. . . .
A. We did. We made the determination, the final determination, based on the quality, by the summer of 2003, that's correct. Before the RFP went out.
Q. Was Medline invited to participate in the RFP?
A. No.
Q. And can you describe generally what the RFP process was and what the ultimate result was?
A. We selected three vendors that we wanted to participate in the RFP, we met with them, we explained-we showed them the bills of materials, we explained what were going to be doing. We were going to be asking them to quote pricing based on the items-the individual contents of each procedure tray.
We very carefully instructed them not to at this point substitute any of their own items in an attempt to bring the price down. We wanted to get an apples to apples comparison of the vendors' pricing on those devices. And then we set a time to issue the RFP and we did.
Q. What information was provided to the potential vendors as to the tray specifications?
A. Generally, it was the information contained in the BOM, the bill of materials.
Q. And who provided that information to the suppliers?
A. We did. Ruth would have ultimately given them the packets.
Q. Was there a level playing field?
. . . .
A. Yes. Everybody had the same information. Everybody was given exactly the sam information and the same instructions.
Q. After the potential vendors were provided with the specifications, what happened next?
A. They took the information and they came back to us with proposals.
Q. In what form?
A. Some sort of written form. And I honestly don't remember what it was. But it was some sort of written response naming each tray and the contents they were going to provide and the price for that tray or procedure pack. Custom procedure —
Q. What happened next?
A. We compared the three responses, we compared them side by side, and we evaluated them on really two basic criteria at that point, price and content of the trays, of the custom procedure trays.
Q. What was the result of the review?
A. The result of the review was two-fold. One, PHS came in as the high bidder. And when evaluating what they bid versus the other two vendors, PHS was the only company that followed our instructions and bid exactly what we asked them to bid.
Q. Meaning what?
A. Meaning that they didn't substitute any of their own supplies or other supply products that they could probably acquire at a lower price. They gave us exactly what we wanted, exactly what our clinicians are used to using and wanted to use.
Q. So what was the ultimate result for the RFP?
A. At that point, because PHS was the only company that followed the basic instructions of the RFP, at that point, we worked with them solely to develop the custom procedure trays and to move forward. (23:22-27).
Q. All right. When you purchased the CPTs from Maxxim, they weren't under a supply agreement sponsored by Novation, were they?
A. No, they were not.
Q. And was it under a GPO sponsored by Amerinet?
A. No. To my knowledge- and it was signed by my predecessor. To my knowledge it was an individual contract between Maxxim Medical and St. Joseph's.
Q. Does St. Joe's now purchase CPTs through a contract sponsored by a group purchasing organization?
A. Yes.
Q. What is the name of that group purchasing organization?
A. There are really two involved, but it's Premier Partners that we purchase through, and we access Premier through Yankee Alliance.
Q. All right. I'd like to go through this slowly, if we can, because to me it can be complicated. What is the relationship between Premier on the one hand, and Yankee Alliance on the other?
A. Premier is the national purchasing group. It is owned by a number of other entities. One of those entities is Yankee Alliance. Yankee Alliance, in turn, is a regional purchasing group that is owned by a number of different entities, also. And we access that because one of those entities is Covenant Health Systems, which is a Catholic organization that we are an affiliate member of. (17:16-17).
. . . .
Q. All right. So if you look at the hierarchy, you have St. Joe's, and then it's Covenant, then Yankee Alliance, then Premier?
A. Yes.
Q. If I'm wrong, correct me.
A. No. St. Joe's is an affiliate member of Covenant. Covenant is an owner of Yankee, Yankee is an owner of Premier.
Q. Okay. Did you play a role in the process by which St. Joe's determined whether it would become a member of Covenant, and subsequently become a member of Yankee Alliance?
A. I did.
Q. Can you describe what that role was?
A. When I arrived there, they were already in the middle of looking at Covenant. My predecessor had begun some cost analysis to see if there were savings to be had through us using Yankee Alliance and Premier. I finished those and passed them on to the CFO, but the real decision was made at the board level and the CEO level of whether or not we would become a member of Covenant.
Q. What was the ultimate decision?
A. They became a member of-an affiliate member of Covenant.
Q. Can you tell us when that was?
A. Around December, I would say, of the year 2001.
Q. At that time, did Premier sponsor a supplier for CPTs?
A. Yes.
Q. Who was that supplier?
A. At that time it was called Allegiance. It's now known as Cardinal Health Systems. (17:18-20).
. . . .
Q. At the time that St. Joseph's joined Yankee Alliance, did St. Joseph's switch immediately its CPT supplier from Maxxim to Cardinal/Allegiance?
A. No.
Q. Why not?
A. Because there was a pre-existing contract in place.
Q. And at the time that St. Joe's joined Yankee Alliance, did you in your own mind have a plan as to what you would do in identifying a future supplier of CPTs?
A. Yes.
Q. What was your plan?
A. As soon as the Premier contract changed, we would have to be on one of the Premier contracts. They were committed contracts.
Q. Okay. Now, what do you mean by a committed contract?
A. I can back up a little bit. Premier, when they first began, signed single source committed volume contracts with major product areas. Hospitals that wanted to belong didn't have a choice. They were able to drive down market share. And I'm going back, you know, six, seven, eight, nine years.
Subsequent to that, while there are still product areas that are committed, you do have in most cases, as a result of some federal pressure, really, a choice within those product areas. But the product areas themselves are still committed. It means, you need to be on those contracts unless you have some kind of real clinical reason not be on them.
There are a lot of uncommitted contracts that they signed that are usually of lesser importance with other choice. You know, if you want to buy labels you can buy them from two or three different vendors. And they really — it's uncommitted. They really don't care if you use them or not.
Q. Okay. When St. Joe's joined Yankee Alliance, was the Premier contract for CPTs committed or uncommitted?
A. It was committed.
Q. Now, you said that you were delayed making a switch until Premier made its selections? I forget your exact testimony, but it was general statement like that. Can you elaborate?
A. It was my intention that when Premier made their next selection, we would be on one of those contracts. In the meantime, we had a contract that was in effect that we were going to honor.
Q. That was the contract with Maxxim?
A. Yes.
Q. And when was Premier going to announce its new contracts?
A. I can't tell you an exact date, but I would say sometime in the end of 2003, beginning 2004. Something like that. (17:20-22).
. . . .
Q. Okay. By the way, when you were talking about GPOs, can you state what advantages, if any, accrue to a smaller hospital in the context of GPO membership?
A. It's leverage. If you're a large institution, if you're an IDN, an integrated delivery network, you have a lot more leverage because you bring a lot more dollars to the table. You're also able to, if you commit to move the business, usually you're in a position to move the business. A 100-bed hospital, I would commit to move the business, but I don't have the leverage of dollars that a GPO has.
Yankee happens to be a GPO that has the-while they're not-while not every contract includes every single member, for the most part Yankee has the reputation of moving large volumes of business when they commit to contracts. So we get higher tiers of savings. Tier levels. (17:22-23).
. . . .
Q. And did you have conversations with Mr. Pilkington while he was at Maxxim relating to Maxxim's supply of CPTs to St. Joseph Hospital?
A. Yes.
Q. Now, you've just described to us St. Joseph's becoming a member of Yankee Alliance. Did you advise Mr. Pilkington of that at all?
A. I advised his sales rep of that development.
Q. I'm sorry. Who was his sales rep?
A. It was Susan something.
Q. Was it Susan — . . . — Lavoie?
A. Susan Lavoie, yes.
Q. . . . . All right, and what did you tell her?
A. That, you know, we would honor the contract until the Premier contracts changed, but there was a difference in timing. Our contract would end, there would be a space of time that we would be without a contract until the new Premier contracts were announced.
At that point, Tom and I met and had a verbal agreement that we would continue to work together. He did some consulting work for us with his team which saved us some money, because I was upset over the costs of the product. But we agreed that St. Joe's Hospital and Maxxim would continue their relationship until the time Premier signed new agreements.
Q. And then what would happen when Premier signed new agreements?
A. Well, whoever got the agreements, we would have to pick among one of them. Tom and I actually talked about, you know, maybe Maxxim Medical would participate in that. That would have been the easiest way out for us, for Maxxim to have gotten the contract because then-it's a very difficult thing to change procedure trays.
Q. Did you tell Tom Pilkington what would happen if Maxxim were not awarded a Premier contract?
A. Yes. I told him that they would no longer have the business. (17:24-25).
. . . .
Q. Okay. Did you ever have any conversations with Karen McCauley relating to your plans with regard to the identity of a CPT supplier in the context of the Premier award?
A. Karen was fully aware and even talked with Tom Pilkington. I mean, everybody at Maxxim was aware from my sales rep to the regional manager that whenever that contract changed at Premier, we were going to be going with a Premier contract.
Q. Did there come a time when Premier announced its new suppliers?
A. Yes.
Q. Do you recall who the new suppliers were?
A. Of just the kit-packing side?
Q. Yes. Thank you.
A. Okay. Medline, PHS, Windstone and Cardinal are the four that I recall.
Q. All right. And how did you become aware of the new awards?
A. Through Yankee Alliance.
Q. Do you recall approximately when that was?
A. It would have been some time-some time, I would say, in the spring or early summer of 2003. (17:27-28).
. . . .
Q. After the announcement, what did you do next in the context of identifying a new supplier?
A. I waited for some direction from Yankee Alliance.
Q. Did you —
A. Yankee Alliance, I mean —
Q. Yeah, go ahead.
A. Yankee Alliance many times will look at-if there are three or four vendors, they will try and meet with those vendors and decide what would be in the best financial interests of the group, providing that the quality is there. And then they'll make recommendations to us as to how we should go. Us, meaning the membership, the other hospitals. And we generally have a meeting and decide if that's what we want to do. I got a phone call from Tom Lull —
Q. Can you identify — I'm sorry. Can you identify who he is?
A. Tom Lull was at the time — I think he was — I don't remember his title, but he worked in group purchasing at Yankee Alliance. And Tom called me and said that we were the only hospital in Yankee Alliance that had a prime vendor agreement with somebody other than Cardinal/Allegiance because all of them, because it was a committed contract, had gotten on board through the years. That was a seven-year contract. The initial contracts that Premier signed were seven year agreements. So in those seven years they had gotten everybody on board.
We were the only ones not on board, so he wanted me to do a cost analysis for them to see, you know, what the effect of that contract would have on a hospital that wasn't participating in their agreement already.
Q. What do you mean when you say you were the only one not on board?
A. Well, all the other hospitals, to my knowledge, that were using CPT trays were using Cardinal/Allegiance CPT trays. (17:28-30).
. . . .
Q. And can you describe what your analysis was and how you did it?
A. I took the CPT trays that we used and the annual volumes, put them on a spreadsheet, and then I asked Karen McCauley to give me pricing, PHS pricing, that corresponded to that. And I put the two price sheets, you know, added her pricing to my price sheet and showed the difference, what the savings would be.
Q. And to whom did you show the difference?
A. I showed the difference to Yankee Alliance.
Q. For what purpose?
A. The purpose I just stated. I was supposed to be the hospital that was not on Allegiance. It showed what the savings — cost savings would be. (17:30-31).
. . . .
Q. Can you tell me what the next step was after you prepared your analysis and presented it to Yankee Alliance?
. . . .
A. We had a subsequent meeting that Bill Jacobson, who was our O.R. director and myself attended in Worcester. There are a number of vendors. I think all of the vendors were present, both the kit vendors and the manufacturers of surgical gowns and drapes. We had an opportunity to meet with all of them, some of whom we had never met before.
We spent quite a bit of time actually looking at the fabric of the packs and gowns more than at the kit packers. And we went back into a room in a meeting, and there were materials managers and O.R. directors present. And one by one the microphone was passed to each person in the room and each person was asked to give his or her comments on what they had seen and what they could see happening.
Some people were reluctant to change from Allegiance, Cardinal because they had arrangements with a different kind of kit packing where they actually put it all into a tub and they take the waste and everything else out with it. And they said, it would be difficult for us to get away from that arrangement.
That's the point that I presented this to the rest of the membership, you know, the other hospitals. I said I had done this analysis on behalf of Yankee Alliance and this is what it showed for our hospital. You know, and I think my point was if a small hospital can save, you know, $35,000, $36,000, that it would be worth our while, especially for some of the bigger places to recoup some savings. Our O.R. director, Bill Jacobson, talked to the quality of the fabric and stuff that he had seen. (17:36-38).
. . . .
Q. Do you recall what happened at the end of this meeting?
A. Yes. The direction Yankee was to pursue was to see how good a contract they could finalize with PHS and Kimberly-Clark.
Q. And thereafter-well, what happened after the meeting in terms of selecting a new tray supplier?
. . . .
Q. At St. Joseph's Hospital?
A. Well, after the meeting, I'm not sure how much after the meeting, but Yankee said, "Yup, we're going to be trying to do as much as possible with PHS and with Kimberly-Clark." I immediately — I asked Karen then to give me a line-by-line detailed analysis of the cost of our trays-we had just done a gross analysis prior to that-to get me a detailed analysis as to what the costs was of what was in our trays. And to as quickly as possible get us-you know, come in, let's get the-what you do is you say, "Look, here's the trays. Here's how many we use in a year, and we need to see prototypes. Now, we need to see them built to make sure they're going to meet our specifications."
So they went ahead and built prototypes and brought them in. We prearranged for the O.R. director, myself and some of his staff to be in a room and open these. Karen wrote comments about things that we liked or didn't like the way they packed them. You know, they may have put something in the wrong layer, and that's important to an O.R. person as they open their packs.
And then when the changes were made, we wanted to — at some point there, I notified Maxxim that we would — we had signed a new agreement with PHS and that we would use up whatever was at Owens Minor, which was the distributor, and whatever Maxxim had already manufactured on our behalf. (17:49-50).
. . . .
Q. Now, what information did you provide to PHS in order to assist them in determining what the tray specs would be?
A. The existing list we have.
Q. Would that be in the bill of materials?
A. Yes. It's whatever is already provided. Sometimes it can come off the-sometimes depending on the manufacturer, the tray kit manufacturer, sometimes they'll put it right on the front, and they'll list everything in there, and they'll put the manufacturer, and they'll put the manufacturer's number, and everything else. Sometimes it's just the sheet that they provide us, and we update. Every time we make a change, they'll provide us a new sheet so that we know exactly what's in the kit. (17:54-55).
. . . .
Q. What procedure was followed-well, what role did you play in the process of determining what the ultimate tray specifications would be, and what the tray design would be?
A. I took the list that we had from Maxxim and asked PHS to match it.
Q. Did you give PHS any information relating to tray layout or tray design?
A. Yes.
Q. What did you give PHS?
A. Well, we gave them everything that we had. I don't know how else to say it. Whatever we already had from Maxxim that says, you know, "In the first fold you put this, in the second layer you put that, and this is the specification," and we gave that to PHS. (17:55-56).
. . . .
Q. All right. The e-mail says, "Paul, the time has come for us to make the switchover to the new Yankee agreement custom packs contract. Please stop manufacturing custom packs for St. Joseph's effective today." Do you see that?
A. Yes.
Q. What was your purpose in making that statement to Mr. Chambers?
A. Well, I had to stop what was being made and put into the pipeline because we have to buy it all out. We had to buy everything that was already in the supply pipeline-the supply chain pipeline.
Q. Whose supply chain pipeline?
A. It's not whose, it's what. Maxxim would be producing them in their facility.
Q. Okay.
A. They might have some inventory on hand. They then would ship them to Owens Minor, our distributor. They would have some inventory on hand. We had inventory on hand. So that's the pipeline. We had to use all of that Maxxim inventory up no matter where it was before we — and time bringing the new PHS stuff in at the same point.
Q. And did you, in fact, purchase all of the existing inventory?
A. Yes. (17:68-69).
. . . .
Q. But you don't know if it was before or after you talked about PHS with Karen McCauley?
A. I would say that I met John after I had talked with Karen McCauley about PHS. I'm not sure if she was an employee of PHS at the time, or not.
Q. Okay.
A. I had heard a rumor and I asked her about it.
Q. Okay. And did you-what did she-did you ask her any questions about PHS in your first meeting with her?
A. My first meeting after what?
Q. No. In your first meeting with her when you thought that she was representing PHS.
A. I'm not sure what we discussed. I'm not sure when that meeting is.
Q. Well, did she ever explain what PHS was to you? Did she —
A. At some point in that time frame I learned basically what — I would say that I got the most information about what PHS was from Yankee Alliance.
Q. Okay. Did Karen McCauley discuss with you any of their customer satisfaction ratings, any of PHS' customer satisfaction ratings?
A. Not that I remember, no.
Q. Did she talk to you about the fact that PHS was not merely a regional distributor — regional seller of packs?
A. The first time I heard that information was from Yankee Alliance.
Q. Okay.
A. They had explained to us that PHS was both a distributor of MedSurge items, and a custom pack assembler. (17:146-147).
. . . .
Q. Okay. And by this time you had dealt with Karen McCauley for about a year, is that correct? As a Maxxim sales representative?
A. Again, I don't know when Sue left and Karen came on board, but I had dealt with Karen again in a previous position that she had. So I had known her for longer than that period of time. (17:147-148).
. . . .
Q. Okay. And in the one year-she testified that she started in July 1 and ended on June 27, 2005. And in all the time that you were dealing with Karen McCauley as Maxxim's account representative, did she appear to you to be a capable, responsive and intelligent account representative for CPTs?
A. Yes.
Q. Yes, okay. And when you decided to go with PHS, was it important for you to make sure that PHS had a capable, intelligent, and responsive account representative?
A. Prior to the decision making or —
Q. Yes.
A. Yeah. I think it's fair to say we expect anybody we do business with to have a capable, bright, energetic, hopefully capable, account representative, yes.
Q. And responsive, because for CPTs there are many changes that have to be made, and you want them done as quickly as possible. Is that a fair statement?
A. I would say it's a fair statement with almost anything a hospital buys, yes. (17:149).
. . . .
Q. Was St. Joseph's decision to select PHS as its CPT tray supplier contingent upon Karen McCauley's being the sales representative?
A. No. (17:157).
. . . .
Q. Okay. And then when you were talking about the prototypes again, specifically you were shown an e-mail of September 16, 2003, which discussed the receipt of some prototypes, you said your mindset at the time was, "Yup, it's going to work, let's go ahead and get it done." Do you recall that testimony?
A. "Yup, it's gonna work, let's go ahead and get her done?"
Q. Okay. What did you mean by that?
. . . .
A. We all had-all I can say is we didn't have a choice at that period in time. Maxxim was going down the tubes, our supply was not guaranteed. We needed to move quickly. We only let our surgeons look at the fabric from Kimberly-Clark, like, for a day or two with the sales rep. Normally that's a week or two week process. We had to move very quickly because we were really afraid we were going to get in a bind like some other hospitals had where they didn't have any product to do surgery. (17:158-159).
. . . .
Q. All right, I'll move on. Did there come a time when Yankee Alliance advised you that PHS had been selected as the vendor?
A. Yes.
Q. Do you recall when that was?
A. It was some time after the meeting in Worcester.
Q. Now, did you ever consider — after Yankee Alliance made its selection, did you ever consider buying CPTs off of the Premier contract?
A. No.
Q. Why is that?
A. Because we were a committed hospital and certainly within our-it's certainly something that we should be able to do. I mean, that's the-we're committed to the Yankee Alliance, Premier philosophy of group purchasing, and this was not something that we could have stood out there and said that these vendors were not acceptable vendors to our institution. So we had no grounds to say, "No, we would not commit to one of these vendors." (17:160).
. . . .
Q. I'm a little bit confused because earlier you had said that turning over pricing information you considered to be unethical.
A. Yeah, there's ethical and unethical. And as I said before, this contract was over.
Q. Which contract?
A. The contract with Maxxim was over. I had current pricing. Maxxim was aware of the fact that I was going to move the business, and Yankee had made a deal that said, "It's a 12 percent guarantee off what you're now paying." I had no alternative at that point but to say, "How do I calculate the 12 percent for Yankee unless I turn the pricing over?"
Q. But did you consider that ethical or unethical?
A. I consider that ethical.
Q. Okay. Now, there did come a time when you learned that Medline had acquired Maxxim?
A. Yes.
Q. And Medline was a Premier provider?
A. Correct.
Q. Did you ever consider once Medline became-well, once Medline acquired Maxxim, having Medline bid on your CPTs?
. . . .
A. Well, I don't think bid on our CPT. Remember, we didn't issue the RFP, and we didn't issue a request for bids. That was issued by Yankee. So those were already done. We did go to the Medline booth. We did look at — Bill Jacobson and I at the fair, we did look at the Medline products and I was aware of the Medline contract and I don't remember what the savings were guaranteed on that particular contract. So inasmuch as that's concerned, yes, we would have considered it just like we considered a Windstone, or any of those other vendors.
Q. Did you offer to meet with Medline after the Worcester fair? About CPT purchases?
A. I don't believe so, no.
Q. And why is that?
A. Well, because after the Worcester fair, it was clear that the direction that Yankee and most of us would be moving in would be down the PHS, Kimberly-Clark path.
Q. Now, as a member of Yankee Alliance, can you tell us why Yankee Alliance selected PHS?
. . . .
A. My understanding is that they selected them because they were the lowest cost quality option that we all had agreed on at the meeting. And I say "we all," I mean the ones that agreed. There were some that disagreed. They were following the membership's direction. (17:161-164).
A. The Bankruptcy Court failed to make any findings or conclusions regarding McCauley's breach of the clause in her Sales Representative Agreement ("SRA") with Plaintiff Maxxim precluding competition with Maxxim while working as its sales representative;
B. The Bankruptcy Court failed to find that PHS' and McCauley's breaches and tortious conduct were a substantial factor in Plaintiffs' damages;
C. The Bankruptcy Court concluded that Maxxim and Medline had no "Legitimate Business Interest" for enforcing the restrictive covenants in the SRA;
D. The Bankruptcy Court concluded that Maxxim and Medline lack standing to bring a claim under the Florida Deceptive and Unfair Trade Practices Act "because Maxxim was not acting as a consumer or purchaser of goods or services in its dealings with PHS and McCauley";
E. The Bankruptcy Court concluded that McCauley did not have fiduciary obligations to Maxxim that she violated;
F. The Bankruptcy Court concluded that PHS had no knowledge of McCauley's fiduciary obligations not to compete with Maxxim;
G. The Bankruptcy Court concluded that Maxxim had no "actual or identifiable" business relationship with the hospitals in Maine whose Custom Procedure Tray ("CPT") business was [allegedly] misappropriated by PHS and McCauley;
H. The Bankruptcy Court concluded that Maxxim's competitive and customer specific information, acquired by PHS from McCauley while she was still working for Maxxim, was not a "trade secret" under the Uniform Trade Secrets Act;
I. The Bankruptcy Court concluded that McCauley did not violate the covenant in the SRA restricting her use of "Proprietary Information," as that term is defined in the SRA;
J. The Bankruptcy Court concluded that Plaintiffs' request for a permanent injunction had been rendered moot;
K. The Bankruptcy Court awarded costs to Defendant.
V. Issues in PHS' and McCauley's Cross-Appeal
PHS and McCauley assert that the Bankruptcy Court erred as a matter of law, misapplied the law or was clearly erroneous as follows:
A. The Bankruptcy Court denied PHS' and McCauley's Motion to Amend their Answer to assert a defense of res judicata or lack of standing.
B. The Bankruptcy Court denied PHS' and McCauley's Motion to Amend their Answer to assert a claim for attorney's fees.
VI. Issue in Consolidated Appeal
VII. Discussion — The Appeal A. Substantial Factor Causation
Maxxim and Medline argue that McCauley's contract breaches were a substantial factor in Maxxim's losses. Maxxim and Medline argue that the evidence was that PHS used Maxxim's representative in Maine from February, 2003 onward to promote PHS as an immediate alternative to Maxxim, blunting Maxxim's efforts to retain the business. Maxxim and Medline further argue that McCauley and Maxxim's former CPT customers (Maine Medical, Penobscot Bay Medical Center, Central Maine, St. Joseph's — Bangor) all admitted that PHS acquiring a good account executive in New England was an important factor in their success in penetrating that market.
1) Substantial Factor Test
In Tuttle/White Contractors, Inc. v. Montgomery Elevator Co., 385 So.2d 98, 100 (Fla. 5th DCA 1980), the Court explains the "substantial factor" test:
According to Corbin on Contracts, the responsibility for contractual damages which are the result of multiple causes appears to be governed by the "substantial factor" test:
In all cases involving problems of causation and responsibility for harm, a good many factors have united in producing the result; the plaintiffs total injury may have been the result of many factors in addition to the defendant's tort or breach of contract. Must the defendant pay damages equivalent to the total harm suffered? Generally the answer is Yes, even though there were contributing factors other than his own conduct. Must the plaintiff show the proportionate part played by the defendant's breach of contract among all the contributing factors causing the injury, and must his loss be segregated proportionately? To these questions the answer is generally No. In order to establish liability the plaintiff must show that the defendant's breach was a "substantial factor" in causing the injury.
The Court notes that Maxxim and Medline entered into a Stipulation providing that Maxxim would be entitled to damages or settlement proceeds relating to the conduct of PHS and McCauley prior to November 10, 2003, and Medline would be entitled to damages or settlement proceeds relating to the conduct of PHS and McCauley on or after November 10, 2003. Karen McCauley was a sales representative for Maxxim from July 1, 2002 until June 27, 2003.
2) Maxxim's Damages
The Bankruptcy Court included Findings of Fact which explain in detail the various causes of Maxxim's loss of business in Maine. The Court has included trial testimony of Maine Medical Center, Penobscot Bay Medical Center, Central Maine Healthcare, and St. Joseph's Hospital — Bangor above, to illustrate the substantial evidence supporting the Bankruptcy Court's conclusion that PHS and McCauley did not cause Maxxim's loss of business in Maine.
Maxxim was not awarded a Novation contract in December, 2002. Maxxim bid for the contract, but was excluded in final bid selection. The Novation contract accounted for 75% of Maxxim's CPT business in Maine. (12:242-246). PHS was awarded a Novation contract for 2002-2005. Maine Medical Center, Penobscot Bay Medical Center, and Central Maine Healthcare were in the Novation GPO, and intended to seek vendors through the RFP process once Novation identified the vendors who were awarded a Novation contract. Novation's decision not to award Maxxim a contract was a direct cause of Maxxim's loss of Maine CPT business, and was independent of any acts of PHS and McCauley.
In general terms, the RFP process is a search for the best quality provider with a favorable quality-cost ratio. The process may involve an initial group consultation to clearly establish the needs of the entity, and to select participants, then furnishing identical specifications/instructions to all invitees for submission of their proposals, including the criteria upon which the proposals will be evaluated, and then comparing the responses. The RFP process lends itself to meaningful comparison of the proposals of prospective vendors.
Maine Medical Center, Penobscot Bay Medical Center and Central Maine Healthcare also voiced concerns as to quality of Maxxim's CPTs. Maxxim's Chapter 11 filing in February, 2003 triggered further concern as to product supply.
St. Joseph's Hospital — Bangor joined the Yankee Alliance before Karen McCauley became a Maxxim sales representative. St. Joseph's Hospital — Bangor had an individual contract with Maxxim. St. Joseph's Hospital — Bangor was in the Premier GPO, and, upon the expiration of the Maxxim contract and the expiration of the seven-year Premier contracts, intended to seek a Premier vendor. Maxxim was not a Premier vendor.
There is trial testimony that it is important that a vendor have a capable, intelligent, responsive sales representative. Maxxim's Novation customers testified that the normal procedure to select a CPT vendor is through the RFP process, wherein Novation vendors compete against each other. Maxxim's Novation customers elected to initiate the RFP process. There is no evidence that establishes a causal link between the decision of Maxxim's Novation customers to initiate the RFP process and the conduct of PHS and McCauley. The evidence shows that Maxxim was excluded from consideration due to a combination of the loss of the Novation contract, poor quality, and the Chapter 11 filing.
According to St. Joseph's Hospital — Bangor, Maxxim knew that when the Premier contracts were up for renewal and the Maxxim contract expired, a new CPT contract would go to a Premier vendor. Maxxim's CPT customers recognized their obligation to purchase the CPTs (a custom product) in the supply pipeline, and did so until the selection of a new vendor.
The Bankruptcy Court identified the factors which caused Maxxim's losses, which were completely independent from any acts of PHS and McCauley The Bankruptcy Court concluded that the evidence did not establish a causal link between the termination of Maxxim's contracts with its Novation customers, and any act of PHS and McCauley.
As to causation for Maxxim's damages, the Court affirms the findings and conclusions of the Bankruptcy Court.
3. Medline's Damages
Maxxim and Medline argue that Medline had GPO contracts with Novation and Premier, that Novation contracts did not prevent customers from buying from Medline, that Medline had not filed Chapter 11, and that there is no evidence of service or supply problems as to Medline. Maxxim and Medline argue that the only proof as to damages was that Medline was unable to penetrate the Maine market because McCauley had delivered Maxxim's customers to PHS. Maxxim and Medline argue that McCauley's speed in directing Maxxim's customers to PHS caused Medline to be deprived of CPT earnings from Maxxim's business.
In January, 2003, Medline was a Novation vendor. After Maxxim was not awarded a Novation contract, Maxxim's Novation customers went through the RFP process to replace Maxxim. The RFP process "levels the playing field" in that each vendor is given an equal opportunity to respond, and each vendor is evaluated by applying the same criteria to the vendor's response.
The Court notes that the combination of Maxxim's loss of the Novation contract, chronic quality issues, and Maxxim's Chapter 11 filing created uncertainty for Maxxim's CPT customers as to a ready supply of CPTs, such that some customers accelerated the RFP process. Gauthier Testimony, supra.
During its RFP process, Maine Medical Center was aware that Medline was a Novation vendor. Maine Medical's clinicians did not approve Medline and Medline was not invited to participate in Maine Medical's RFP. Guare Testimony, supra. There is no evidence that links PHS and McCauley to the decision not to invite Medline to participate.
Penobscot Bay Medical Center invited Medline to participate in its RFP, and Medline did participate. The committee found that Medline did not comply 100 % with the committee's preferences as to the components included in the CPT, and that Medline's costs were the highest of the competing vendors. After comparing cost and performance, Penobscot Bay selected PHS and not Medline. Whitney Testimony, supra. There is no evidence that links any act of McCauley and PHS outside of the RFP process to the committee's decision.
Central Maine Healthcare invited three vendors to participate in its RFP, but Medline was not among them. There is testimony that Central Maine's selection of participants was based on quality. Gauthier Testimony, supra. There is no evidence that links PHS and McCauley to the decision not to invite Medline to participate.
St. Joseph's Hospital — Bangor recognized that Medline was a Premier vendor. When Yankee Alliance had its vendor fair in Worcester, Medline had a booth, along with other potential vendors. As a group, Yankee Alliance decided to pursue a contract for CPTs with PHS. There is testimony that PHS provided the lowest cost quality option that the membership agreed to. Maynard Testimony, supra.
In its Findings of Fact and Conclusions of Law, the Bankruptcy Court states that references to "Maxxim" or "Plaintiff' are intended to include Medline unless otherwise indicated by the context. (Footnote 1). The Bankruptcy Court concluded that PHS and McCauley did not cause Maxxim's damages. There is substantial evidence that PHS and McCauley did not cause Medline's alleged damages, including any pre-separation acts and any post-separation acts. As a Novation vendor and a Premier vendor, Medline had the same opportunity to compete for the CPT business in Maine that PHS had.
As to causation for Medline's alleged damages, the Court affirms the findings and conclusions of the Bankruptcy Court.
B. Count I — Breach of Contract Covenant Restricting Use of Confidential Information
Maxxim and Medline argue that the Bankruptcy Court erred in concluding that McCauley did not breach the covenant restricting McCauley's use of "Proprietary Information" as defined in the SRA.
Maxxim argues that the information that McCauley gave PHS about her customers and their product preferences while still employed by Maxxim constituted "Proprietary Information." Maxxim argues that McCauley provided PHS a list of her Maxxim accounts, and attended a "pack meeting" to permit Maxxim competitors to examine Maxxim CPTs and to supply information to those competitors about the Maxxim packs. Maxxim further argues that McCauley provided PHS with Maxxim's CTMS material, including BOMs, for Maxxim customers Maine Medical, Frisbie Memorial, Penobscot Bay, Maine General, Stephens Memorial and Mid-Coast. Maxxim argues that it is immaterial that the hospitals freely shared the alleged Proprietary Information with others.
In Count I of the Adversary Complaint, Maxxim alleges that:
42. On July 1, 2002, Maxxim and Defendant McCauley entered into the Agreement, a valid and enforceable written contract, which was supported by consideration.
43. Defendant McCauley's covenant regarding confidential information, contained in the Agreement, was reasonable, as it was no more restrictive than necessary to protect the goodwill of Maxxim, and the restrictions did not impose undue hardship on Defendant McCauley.
44. Defendant McCauley's use of confidential and proprietary information of Maxxim, as alleged, constitute breaches of the Agreement.
"Goodwill" refers to the expectation that an established customer will return to do more business. In this case, however, the absence of a GPO contract was a critical factor, in addition to product quality, cost, and reliability. Maxxim's own acts impaired whatever customer goodwill Maxxim had. Maxxim did not lose its CPT customers because PHS knew the identity of Maxxim's customers, what was in Maxxim's CPTs, or the cost to produce Maxxim CPTs.
At trial, McCauley testified that she sent BOMs to PHS at the request of her customers. McCauley's acts took place long after Maxxim's customers knew that Novation did not award Maxxim a contract. Once Novation did not award Maxxim a contract, Maxxim's then-customers continued their CPT business with Maxxim only on an interim basis, and sought a new vendor through the RFP process. The hospitals communicated with the vendors who had been awarded a Novation contract, providing their product preferences to them, and the Novation vendors competed against each other in their RFP process. The Yankee Alliance, a GPO, used a comparable process to select vendors.
The elements of a breach of contract are: 1) the existence of a contract; 2) a breach of the contract, and 3) damages resulting from the breach. The Bankruptcy Court found that Maxxim's and Medline losses were caused by factors independent of any act of PHS and McCauley. If the Bankruptcy Court erred in concluding that McCauley did not breach the covenant restricting McCauley's use of Proprietary Information, due to the absence of causation, that error had no impact on the Bankruptcy Court's ultimate conclusion denying relief to Maxxim and Medline. If there was a breach, there were no resulting damages.
The Court affirms the findings and conclusions of the Bankruptcy Court as to Count I.
C. Count II — Breach of Contract 1. Pre-Separation Acts
Maxxim and Medline argue that the Bankruptcy Court did not adjudicate the heart of the dispute between Maxxim and Medline and PHS and McCauley, and that this adversely affected the Bankruptcy Court's conclusions as to the breach of contract, unfair trade practices, breach of fiduciary duty, and tortious interference Counts. Maxxim and Medline argue that the Bankruptcy Court made no findings or conclusions as to McCauley's "commercial espionage and sabotage against Maxxim during a five month period when [McCauley] was still serving as a Maxxim Sales Representative"
Count II is directed to McCauley's alleged violation of the SRA during its term, as well as after the termination of the Agreement.
In Count II, Maxxim alleges that:
49. Defendant McCauley's covenant not to compete, contained in the Agreement, was reasonable, as it was no more restrictive than necessary to protect the business and goodwill of Maxxim, and the restrictions did not impose undue hardship on Defendant McCauley.
50. Defendant McCauley's conduct in competing with Maxxim and in soliciting its customers by engaging in activities for PHS while still in Maxxim's employ, constitute breaches of the Agreement.
The elements of an action for breach of contract are: 1) the existence of a contract; 2) a breach of the contract, and 3) damages resulting from the breach. The Bankruptcy Court found that McCauley knowingly violated her covenant not to compete in going to work for PHS, but Maxxim suffered no damages a result of McCauley's actions. The Bankruptcy Court found that Maxxim's loss of the Maine business was due to the poor quality of Maxxim's services and goods, the loss of a key group purchasing contract and the filing of its Chapter 11, for which PHS and McCauley bore no responsibility. In other words, any actions taken by McCauley during the five-month period immediately preceding June 27, 2003 did not cause Maxxim's customers to end their contracts with Maxxim.
As to the request for injunctive relief, the Court notes that Maxxim did not commence the adversary proceeding until after the conclusion of McCauley's employment with Maxxim. An injunction is directed to preventing future harm, and cannot affect past harm. An injunction is the usual remedy to enforce a covenant not to compete, and could not have been granted for any pre-separation acts. The alternative remedy is the award of damages for those acts, but Maxxim's and Medline's damages were not caused by any act of McCauley.
If the Bankruptcy Court erred in not making additional explicit findings as to Count II, the error did not impact the ultimate conclusion of the Bankruptcy Court denying relief to Maxxim and Medline as to Count II.
2. Post-Separation Acts
Legitimate Business Interest in Enforcing Post-Separation Non-Compete Covenant
Maxxim and Medline argue that the Bankruptcy Court erred to the extent it held or intended to hold that the "legitimate business interest" requirement is applicable to a covenant not to compete during the term of the sales representative relationship, citing Insurance Field Services, Inc. v. White White Inspection Audit Service, Inc., 384 So.2d 303, 307-308 (Fla. 5th DCA 1980) (even without agreement, during ongoing relationship there exists a common law duty not to engage in disloyal acts). Maxxim and Medline argue that the "legitimate business interest" requirement applies to a post-separation non-compete clause, and the Bankruptcy Court committed an error of law and misapplied the law to the facts by its overly narrow construction of "legitimate business interest." Maxxim and Medline argue that the Bankruptcy Court erroneously omitted analysis of Maxxim's established customer relationships at the time the SRA was signed, and the presence of other "Proprietary Information," focusing only on trade secrets and confidential business information.
In the Findings of Fact and conclusions of Law, the Bankruptcy Court states:
The term "legitimate business interest" includes, but is not limited to (1) trade secrets, (2) valuable confidential business or professional information that otherwise does not qualify as trade secrets, (3) substantial relationships with specific prospective or existing customers and (4) customer goodwill. Any restrictive covenant not supported by a legitimate business interest is unlawful and is void and unenforceable. In addition, a person seeking enforcement of a restrictive covenant also must prove that the contractually specified restraint is reasonably necessary to protect the legitimate business interest or interests justifying the restriction. Maxxim failed to prove any legitimate business interest worthy of protection by a covenant not to compete.
The enforceability of a covenant not to compete is controlled by the law at the time the agreement takes effect. Ch. 542.335,Florida Statutes (2002) controls the enforceability of the covenant not to compete in the SRA. There was extensive trial testimony on the issue of trade secrets and confidential business information that Maxxim and Medline contended that McCauley used in breach of the SRA. The Bankruptcy Court concluded that Maxxim failed to prove that McCauley had access to confidential or proprietary information obtained during her employment with Maxxim.
A) Substantial Relationships with Existing Customers
Maxxim argues that Maxxim's numerous CPT relationships existed at the time the SRA was signed, were ongoing during the term of the SRA, and thereafter.
The Bankruptcy Court noted Maxxim's supply problems, service quality problems, the Novation Agreement, the loss of other sales representatives, and Chapter 11 filing, and the impact of those factors on Maxxim's relationships with its existing customers. The Bankruptcy Court states: "Most importantly, as discussed in the section above dealing with causation, McCauley's actions simply did not result in any damages to Maxxim."
Maxxim had substantial relationships with existing customers until December, 2002. However, once Novation did not award Maxxim a contract, those relationships were over. Maxxim's relationship with its CPT customers continued only to the extent that there were additional CPTs in the supply pipeline that the hospitals were obligated to purchase. Maxxim's customers intended to use the RFP process to select another vendor, with "stocking agreements" covering the time gap between the conclusion of Maxxim's contract and the selection of a new vendor. Maxxim's own actions impaired its substantial relationships with Maxxim's existing customers. PHS was a Novation vendor and a Premier vendor. This situation is somewhat like Shields v. Paving Stone Company, 796 So.2d 1267 (Fla. 4th DCA 2001).
If the Bankruptcy Court erred in not including any explicit conclusion of law beyond its conclusion that Maxxim did not prove any legitimate business interest justifying the restrictive covenant, given the Bankruptcy Court's conclusion as to causation, that error had no impact on the Bankruptcy Court's ultimate decision to enter judgment in favor of PHS and McCauley.
B. Proprietary Information
Maxxim argues that Maxxim provided extensive proprietary information and training on Maxxim's products, customers, pricing and profits to Karen McCauley. The "proprietary information" included "organized, detailed, competitively sensitive and current customer files" from Susan LaVoie and Thomas Pilkington, and a laptop containing Maxxim's "Custom Tray Management System" ("CTMS"). The CTMS included CPT specifications and contents, Bills of Materials containing content specifications, the pack and content pricing and the costing, overhead, profit and commission information for Maxxim CPTs. Maxxim argues that Maxxim restricted access to its CTMS to its Sales Representatives, who were not authorized to give any information on CTMS to any competitor. Maxxim further argues that the files and CTMS contained valuable current and historical information on Maxxim's dealings with its customers, which would be of economic advantage to new competitors, which took many years and considerable effort to accumulate, and which was critical to Maxxim in generating CPT sales and profits and managing the CPT business.
Maxxim further argues that McCauley had access to Maxxim's computer assisted drawings/computer assisted manufacturing printouts. Maxxim contends it reasonably restricted access to CAD/CAM designs to its production personnel and to the Sales Representatives and supervisory personnel for their own CPT customers. The Court notes that Maxxim was unable to identify which sales personnel had accessed CAD/CAM designs during the relevant time.
Maxxim also refers to the lengthy collaborative process involved in the design of CPTs, and the long sales cycle of 6 to 9 months required to build a relationship with decision-making personnel.
In its Findings of Fact, the Bankruptcy Court made findings as to CPT design and specifications, Bills of Material, the CTMS, CAD/CAM, and the terms of the Maxxim/Novation Agreement. The Bankruptcy Court noted that Maxxim did not enter into confidentiality agreements with its customers, as to CPT contents and design, or bills of material. The Bankruptcy Court also noted that bills of material are routinely provided to customers in connection with the sale of CPTs, and are used by customers for a variety of purposes, among them to solicit prices for CPTs from competing suppliers. The Bankruptcy Court noted that hospitals often provide a tray sample to a potential supplier.
McCauley had substantial experience in the health care industry when Maxxim hired her, and already knew the decision-makers at some of the medical facilities and important customers in her territory. Maxxim considered McCauley to be a "turn-key" employee. To the extent that Maxxim is arguing that customer goodwill associated with specialized training is a legitimate business interest justifying the SRA's restrictive covenant, the customer goodwill was no longer present, and the Bankruptcy Court's finding as to causation renders this issue moot.
Ronald Evans, a Maxxim representative, testified in his deposition as to the variety of ways to design a CPT, such as by using the lengthy collaborative process Maxxim describes, or "through a bid submitted by an institution with some required specifications, or a GPO will issue an RFP that may have specific specifications." (Evans Deposition, pp. 45-46). GPO members select from among GPO vendors. Since the hospitals provide their specifications to prospective vendors in the RFP process, a restrictive covenant designed to protect Maxxim's investment of resources in customer relationships, customer preferences and tray design does not serve its purpose.
Once Novation did not award a new contract to Maxxim, Maxxim's then-customers testified that they would not continue their CPT business with Maxxim. The identity of Maxxim customers, their preferences, and cost/pricing information were of no use to PHS once the Maxxim contracts expired. The evidence at trial establishes that Maxxim's Novation customers selected PHS through the RFP process. In the RFP process, the hospitals communicated their product preferences to the GPO vendors, who competed against each other. As to customers in the Yankee Alliance, the evidence at trial establishes that Yankee Alliance used a comparable process.
The restrictive covenants of the SRA did not protect trade secrets, other confidential business information, customer relationships, or customer goodwill. If the Bankruptcy Court erred in not including any conclusion as to legitimate business interests beyond trade secrets, given the Bankruptcy Court's conclusion as to causation, that error had no impact on the Bankruptcy Court's ultimate conclusion to enter a final judgment in favor of PHS and McCauley.
The Court affirms the findings and conclusions of the Bankruptcy Court as to Count II.
D. Count III — Breach of Fiduciary Duty Fiduciary Duty to Maxxim
Maxxim argues that the relationship between Maxxim and McCauley was more than a "mere independent contractor relationship." Maxxim relies on the Maxxim's entrustment of "Proprietary Information" to McCauley, the acceptance of which established a fiduciary relationship implied in law. Maxxim contends McCauley breached her alleged fiduciary duty to Maxxim by disclosing confidential information. Maxxim further argues that McCauley breached the common law duty not to engage in disloyal acts in anticipation of future competition.
Maxxim argues that McCauley gave Maxxim BOMs and product specifications to PHS, and gave PHS a list of Maxxim customers that McCauley felt she could take with her to PHS. Maxxim further argues that McCauley appeared at customer meetings and promoted PHS products as an alternative to Maxxim products, such as the guided tour of PHS's production facilities. Maxxim argues that even if the information disclosed was "common knowledge," steering Maxxim's customers to PHS breached McCauley's duty of loyalty.
The Bankruptcy Court found that the relationship between Maxxim and McCauley was, at most, an independent contractor relationship. The Bankruptcy Court noted that, within a relationship characterized as confidential, the purpose of the disclosure, the past practice of the parties, the customs of the industry, and other circumstances of the disclosure remain relevant in determining the recipient's obligations.
The elements of an action for breach of fiduciary duty are: 1) the existence of a fiduciary duty; 2) breach of that duty; and 3) damage proximately caused by that breach. Gracey v. Eaker, 837 So.2d 348 (Fla. 2002). In the absence of an express fiduciary relationship, courts have found the presence of a fiduciary relationship implied in law. A fiduciary relationship must be established by competent evidence, and the burden of proving such a relationship is on the party asserting it. Kislak v. Kreedian, 95 So.2d 510, 514-15 (Fla. 1957). To establish a general fiduciary relationship, "a party must allege some degree of dependency on one side and some degree of undertaking on the other side to advise, counsel, and protect the weaker party."Watkins v. NCNB Nat'l Bank of Fla., N.A., 622 So.2d 1063, 1065 (Fla. 3d DCA 1993). Fiduciary relationships implied in law are premised upon the specific factual situation surrounding the transaction and the relationship of the parties. Courts have found a fiduciary relationship implied in law "when confidence is reposed by one party and a trust accepted by the other." Capital Bank v. MVB, Inc., 644 So.2d 515, 518 (Fla. 3d DCA 1994) (citations omitted).
What distinguishes an "independent contractor" from an "agent" is the degree of control retained or exercised over the manner in which work is performed; an employee who is subject to the control or direction of the owner only as to the result is an independent contractor. In determining the status of a party as an independent contractor, the Court would look first at the agreement between the parties, and honor that agreement, unless other provisions of the agreement, or the parties' actual practice, demonstrate that it is not a valid indicator of status. Where other provisions of the agreement, or the actual practice of the parties, belie the creation of the status agreed to by the parties, the actual practice and relationship of the parties should control. Keith v. News and Sun Sentinel Company, 667 So.2d 167 (Fla. 1995).
The SRA shows that the parties were in an arm's length, independent contractor relationship. The SRA expressly provides that McCauley had limited authority and was not Maxxim's agent. In order for Maxxim and Medline to establish the presence of a fiduciary relationship, Maxxim and Medline would have to prove additional facts independent of the SRA. "Fiduciary relationship" is a broad umbrella that includes both formal and informal relationships. The designation of business information entrusted to a sales representative as "confidential" does not necessarily create a fiduciary relationship. The evidence did not show that confidence was reposed as a result of the position of superiority and influence held by McCauley.
The Court has affirmed the finding that the business information that Maxxim and Medline designated as a trade secret, i.e. tray contents and design, bills of materials, is not a trade secret. To the extent that McCauley had access to other business information that Maxxim considered confidential, the trial record establishes that PHS was selected as a vendor through the RFP process, in which hospital customers disclosed their product preferences and specifications directly to PHS. Therefore, if McCauley did disclose Proprietary Information, the disclosure did not cause Maxxim's damages.
The Bankruptcy Court found that McCauley did not disclose confidential business information or trade secrets, and Bankruptcy Court identified independent causes of Maxxim's and Medline's damages. The Court has concluded that the Bankruptcy Court did not err in its finding.
The Court affirms the decision of the Bankruptcy Court finding only an independent contractor relationship, not a fiduciary relationship. If the Bankruptcy Court erred in finding the absence of a fiduciary relationship, that error has no impact on the Bankruptcy Court's finding as to causation.
The Court affirms the findings and conclusions of the Bankruptcy Court as to Count III.
E. Count IV — Aiding and Abetting Breach of Fiduciary Duty Knowledge of McCauley's SRA
Maxxim argues that the Bankruptcy Court erred in concluding that PHS had no liability for aiding and abetting McCauley's breach of fiduciary duty on the ground of lack of knowledge.
Maxxim argues that PHS knew that McCauley was still Maxxim's sales representative at the beginning of its contacts with McCauley. Maxxim further argues that PHS management had actual knowledge that it was Maxxim's standard practice to have their sales representatives sign non-compete agreements. Maxxim argues that John Abele's knowledge of Maxxim's contractual requirements is imputed to PHS.
Maxxim further argues that, in light of the common law duty not to engage in disloyal acts in anticipation of future competition, PHS' claims of ignorance are false. Maxxim argues that the precise state of PHS' knowledge is irrelevant, since PHS knew that McCauley was under contract to Maxxim, and that McCauley's disclosure of proprietary Information to PHS, and McCauley's direction of Maxxim's customers to PHS was inconsistent with the terms of McCauley's relationship with Maxxim.
Maxxim further argues that once McCauley joined PHS in July, 2003, McCauley's knowledge of the terms of the SRA and business relations with Maxxim, and of Maxxim's contracts and business relations with Maxxim's customers, were imputed to PHS, regardless of the time, place or manner in which McCauley acquired that knowledge. Maxxim argues that, as of that date, PHS was aware of McCauley's covenant not to compete with Maxxim.
There is trial testimony that not every Maxxim sales representative executed an employment agreement which included a covenant not to compete; John Abele, PHS employee and former Maxxim employee, testified that he did not execute such an agreement (17: 74). PHS denied knowledge of the terms of the SRA. McCauley testified that McCauley did not convey the terms of the SRA to PHS. McCauley testified that McCauley sought out PHS, and would have left Maxxim whether or not PHS hired her. In any event, once Novation did not award Maxxim a contract, Maxxim's CPT customers intended to and did select a new vendor. Maxxim's Novation customers continued to purchase from Maxxim until the CPTs in the supply pipeline were gone, and they had selected a new vendor through the RFP process. PHS was a Novation vendor and a Premier vendor, and was selected through the RFP process.
The Bankruptcy Court concluded that McCauley had no fiduciary duty to Maxxim, and the Court has affirmed as to Count III.
The Bankruptcy Court found that Maxxim did not establish that PHS knew the terms of McCauley's contract, and rendered substantial assistance to McCauley in connection with McCauley's alleged breach of duty. The Bankruptcy Court further found that PHS did not cause Maxxim's damages.
It is the role of the trial court to resolve conflicts in the evidence. There is substantial evidence supporting the Bankruptcy Court's finding that PHS did not know the terms of McCauley's contract with Maxxim. There is substantial evidence that the status of PHS as a Novation vendor and a Premier vendor is what led Maxxim's CPT customers to select PHS to replace Maxxim.
The Court affirms the findings and conclusions of the Bankruptcy Court as to Count IV.
F. Count V — Tortious Interference with Contract and Advantageous Business Relations
Knowledge of McCauley's SRA
Maxxim's "Actual or Identifiable" Business Relationship With Maine Hospitals
1) Knowledge of McCauley's SRA
Maxxim argues that PHS had actual knowledge of McCauley's contract in February, 2003, and, by using McCauley during that time, PHS interfered with McCauley's contractual and common law duty not to compete with Maxxim. Maxxim argues that PHS influenced or induced McCauley's breach of her obligation not to compete with Maxxim and not to disclose their Proprietary Information. Maxxim further argues that PHS influenced or induced McCauley's breach of her post-separation non-compete covenant.
The Court has affirmed the finding of the Bankruptcy Court as to PHS' lack of knowledge of the terms of McCauley's contract. The Bankruptcy Court further found that Maxxim did not prove that PHS induced any breach of McCauley's SRA. In any event, the actions of PHS did not cause Maxxim's damages.
2) "Actual or Identifiable" Business Relationship with Maine Hospitals
Maxxim argues that: 1) the Bankruptcy Court's finding that Maxxim and Medline presented no evidence of a business relationship with Maine hospitals is clearly erroneous; 2) the Bankruptcy Court's finding that PHS did not intentionally interfere and PHS acted in good faith by promoting its business misapplied the undisputed facts to the law and/or was clearly erroneous.
The elements of a tortious or intentional interference with a business relationship are: 1) the existence of a business relationship; 2) the defendant's knowledge of that relationship; 3) an intentional and unjustified interference with the relationship by the defendant; and 4) damage to the plaintiff as a result of the breach of the relationship. Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So.2d 812, 814 (Fla. 1994).
In Adversary Complaint, Maxxim alleged:
68. Plaintiff's employment and customer contracts constitute contracts.
. . . .
71. Defendants PHS and McCauley have maliciously, intentionally and improperly interfered with Maxxim's customer contracts by inducing Maxxim's customers to enter into contracts with PHS and to terminate contracts with Maxxim, and by diverting business under Maxxim's existing customer contracts to itself.
. . . .
77. Defendants have no justification, privilege or excuse for their conduct.
The Bankruptcy Court found that Maxxim presented no evidence of any actual identifiable understanding or agreement which in all probability would have been completed absent the actions of PHS and McCauley. The Bankruptcy Court states that, although Maxxim once had a business relationship with certain hospitals in Maine for the supply of CPTs, the hospitals ceased to do business with Maxxim for reasons independent of any actions attributable to PHS and McCauley.
The Bankruptcy Court further found that PHS did not enter the market with the intent to sabotage Maxxim's CPT business. PHS began soliciting business from hospitals in Maine once PHS was awarded the Novation contract. The Bankruptcy Court further found that Maxxim did not prove causation of its damages.
The Court affirms the findings and conclusions of the Bankruptcy Court as to Count V.
G. Count VI — Violation of Uniform Trade Secrets Act
Maxxim argues that the Bankruptcy Court misapplied the law in its conclusion that Maxxim's CPTs, BOMs and other materials Maxxim gave to McCauley were not trade secrets. Maxxim further argues that the Bankruptcy Court made no findings or conclusions regarding the "misappropriation" or "improper means of acquisition." Maxxim contends that: 1) the trial court erred when it ruled that customers' knowledge of customer specific information defeats any claim under the trade secret statute; 2) possession of information is sufficient to acquire the protection of the UTSA and there is no requirement of "ownership"; 3) Defendants acquired the information by improper means.
In the Adversary Complaint, Maxxim alleged that:
81. Defendants had access to confidential and proprietary Maxxim product and design specifications and contractual information. This information constituted trade secrets belonging to Maxxim under the Uniform Trade Secrets Act in that Maxxim made reasonable efforts under the circumstances to maintain its secrecy; furthermore, the information had independent economic value, and could not have been generated and developed absent substantial effort and expense on the part of Maxxim.
82. Defendants misappropriated Maxxim's trade secrets, thereby gleaning the economic value from the information. They did so without Maxxim's consent, despite a duty to maintain the secrecy of the information.
This focus of this case is Maxxim's CPT business. The Complaint's reference to "confidential and proprietary Maxxim product and design specifications" means CPT contents and design. The CPT is a custom product that hospitals purchase by entering into contract with a vendor; the Court assumes that the "contractual information" alleged in the Complaint refers to a hospital's contract to purchase CPTs from Maxxim. This would include the customer's identity and the customer's specifications as to the contents of a CPT, which results in a "bill of materials." McCauley testified at trial that, at the request of customers, she sent BOMs to PHS.
The Court notes that Maxxim did not enter into confidentiality agreements with the hospitals which purchased its products, and did not label its products or documents "confidential." There is trial testimony that it is industry practice for hospitals to use the BOM to solicit RFPs, and the hospitals may provide tray samples to prospective vendors. There is no evidence that Maxxim identified what Maxxim considered a trade secret to McCauley or the hospitals.
There is trial testimony that the CPT business is a "small world." There are a limited number of hospitals in Maine. GPOs publicize the award of their contracts to their members, and material managers attend the same meetings and vendor fairs. PHS was awarded a Novation contract and was a Premier vendor. It would not have been difficult for PHS to determine which hospitals were Maxxim's customers. Knowing that PHS was a Novation vendor, the hospitals would have communicated their product preferences and specifications, seeking a response to an RFP. There is trial testimony that PHS was selected through the RFP process.
The Bankruptcy Court credited McCauley's testimony that McCauley sent BOMs to PHS at the request of customers. Maxxim may have considered the BOMs, and tray contents and design, to be trade secrets and/or confidential business information, but did not take reasonable steps to protect that information. The Bankruptcy Court further found that, even if Maxxim established that tray contents and design were trade secrets, Maxxim cannot show that its loss of the CPT business for Maine hospitals was caused any act of PHS or McCauley, but was caused by other factors.
The Court affirms the findings and conclusions of the Bankruptcy Court as to Count VI.
H. Count VII — Unfair Competition
Florida Deceptive and Unfair Trade Practices Act, Ch. 501.204,Fla. Stat.
In Count VII of the Adversary Complaint, Maxxim alleges that the actions of McCauley and PHS in intentionally harming Maxxim by soliciting its customers and employees, and by using Maxxim's confidential and proprietary information, constitute unfair competition. Maxxim further alleges that Defendants misled Maxxim's customers and defrauded Maxxim by Defendant McCauley meeting with customers under the guise of being a Maxxim employee when she had in fact begun working for PHS, causing pecuniary losses to Maxxim.
Maxxim and Medline argue that the Bankruptcy Court erroneously concluded that they lack standing to bring a claim under FDUTPA because they are not "consumers." Maxxim and Medline argue that the right to seek injunctive relief was never limited only to "consumers," and the 2001 amendment extended the cause of action for damages to all "persons," not just to "consumers."
There are cases which support the conclusion of the Bankruptcy Court as to standing, but the Court does not agree with the Bankruptcy Court's conclusion. See Furmanite America, Inc. v. T.D. Williamson, 506 F.Supp.2d 1134 (M.D. Fla. 2007); PNR, Inc. v. Beacon Prop. Mgt. Inc., 842 So.2d 773, 777 (Fla. 2003).
Even if the Bankruptcy Court erred in its conclusion as to standing, the Bankruptcy Court further found that the actions of PHS and McCauley did not violate the FDUTPA, and did not cause Maxxim's and Medline's damages. The Bankruptcy Court found there was nothing confidential or proprietary about the information regarding Maxxim's business in Maine, specifically referring to tray contents and design, and bills of materials, nor was there anything inappropriate as to the way in which PHS came to employ McCauley.
The Court has affirmed the Bankruptcy Court's findings as to confidential or proprietary information, and as to PHS' lack of knowledge of the terms of the SRA. Upon the conclusion of Maxxim's contracts with its Novation customers, those customers sought a new vendor through the RFP process. PHS did not compete with Maxxim, and Medline participated in the RFP process unless and until excluded by the customer's selection.
The Court notes that Appellee argues that the FDUTPA claim in Count VII is preempted by the UTSA claim in Count VI. In the Adversary Complaint, Maxxim incorporates by reference all preceding paragraphs of the Complaint in each subsequent count of the Complaint, a practice which does not comply with the Federal Rules of Civil Procedure. To determine whether Count VII is preempted, the Court would have to determine whether Maxxim's allegations of unfair competition are distinguishable from the allegations of trade secret misappropriation. Allegiance Healthcare Corp. v. Coleman, 232 F.Supp.2d 1329, 1335 (S.D. Fla. 2002).
In Count VI, Maxxim alleges that PHS and McCauley harmed Maxxim by soliciting Maxxim's customers and employees, and by using confidential and propriety information. Because the allegations of the Complaint allege more than the use of confidential and proprietary information, the Court concludes that Count VII is not preempted.
The Court affirms the findings and conclusions of the Bankruptcy Court as to Count VII.
I. Count VIII — Declaratory Judgment that PHS Violated Section 362(a)(3) of the Bankruptcy Code Denial of Injunction
Maxxim and Medline argue that the Bankruptcy Court erred in denying their request for injunctive relief as moot. Maxxim and Medline argue that the Bankruptcy Court did not consider the claims for injunction under the UTSA, Ch. 688, Florida Statutes, and FDUTPA, Ch. 501.211(2), Florida Statutes, but only under the SRA. Maxxim and Medline argue that the Bankruptcy Court erred in relying on Insurance Field Services v. White and White Audit and Inspection Service, Inc., 384 So.2d 303 (Fla. 5th DCA 1980) in finding that the request for an injunction pursuant to the SRA was moot. Maxxim and Medline argue that the Bankruptcy Court did not consider or apply the opinion in Proudfoot Consulting, Inc. v. Gordon, 576 F.3d 1223, 1240 (11th Cir. 2009). Maxxim and Medline further argue that it would be inequitable to deny them equitable relief due to the passage of time. Maxxim and Medline further argue that the Bankruptcy Court did not make specific findings that would justify the denial of injunctive relief.
1. Substantive Counts
Maxxim and Medline sought an injunction to restrain McCauley as to Count I, Count II, Count III, Count V, Count VI, Count VII, and Count VIII. Maxxim and Medline sought an injunction to restrain PHS as to Count IV, Count V, Count VI, Count VII and Count VIII.
The purpose of injunctive relief is prevent future harm; an injunction does not redress past harm. Maxxim and Medline presented evidence as to the damages allegedly caused by PHS and McCauley. As to the substantive counts, the Court has affirmed the finding of the Bankruptcy Court that the damages sought were not caused by the acts of McCauley and PHS. In general, where damages can be calculated which adequately compensate for the harm complained of, the grant of injunctive relief, which is premised on the presence of irreparable harm, is not appropriate. Where a presumption of irreparable harm was applicable, PHS and McCauley rebutted the presumption.
2. Count VIII — Declaratory Judgment
In Count VIII, Maxxim and Medline allege that the goodwill of Debtors' business, including Maxxim's relationships with its employees and customers, constitutes property of the Debtors' estates, that Maxxim's employees and customers are key assets of its business, and wrongful attempts by PHS to solicit Maxxim's employees and customers constitute attempts to obtain possession of the goodwill of the Debtors' business. Maxxim and Medline further allege that PHS' and McCauley's conduct in using confidential information and soliciting Maxxim's customers for the purpose of inducing them to terminate their relationship with Maxxim and to work instead with PHS constitutes an act to obtain possession of property of the Debtors' estates, or of property from the Debtors' estates, or to exercise control over property of the Debtors' estates within the meaning of 362(a)(3) of the Bankruptcy Code.
Maxxim and Medline seek a declaratory judgment that:
1) its employees are the key assets of its business, and therefore constitute part of the business' goodwill, which is property of the Debtors' estates, and
2) PHS' conduct in targeting and contacting Maxxim's employees for the purpose of soliciting them to terminate their employment with Maxxim and to work instead for PHS constitutes an action to obtain possession of property of the Debtors' estates or of property from the Debtors' estates or to exercise control over property of the Debtors' estates within the meaning of 362(a)(3) of the Bankruptcy Code and is precluded by the automatic stay therein.
Maxxim and Medline requested a preliminary and permanent injunction as to:
1. McCauley: prohibiting her from: a) engaging in a competing business; b) working for a competing business; c) soliciting any employee or agency of Maxxim to discontinue the employment or agency relationship with Maxxim, prior to June 28, 2003;
2. McCauley: prohibiting her from ever disclosing Proprietary Information;
3. McCauley: requiring her to return all documents which may contain Proprietary Information;
4. PHS: a) employing McCauley in any capacity; b) taking any action to solicit employees of Maxxim; c) using or disclosing confidential or proprietary information;
5. PHS and McCauley to solicit customers of Maxxim in the Territory or whose identity was disclosed in information provided to PHS by McCauley
Maxxim and Medline further seek the award of damages, the award of costs, expenses and attorney's fees.
1. SRA
In this case, Maxxim and McCauley entered into a contract. As to a controversy based on a private contract, the purpose of a declaratory judgment action is to settle an actual controversy before it ripens into a breach of a contractual duty. Given the context, a declaratory judgment enforcing the SRA was intended to prevent any act exercising possession of or control over property of the estate, in violation of the automatic stay.
Maxxim never sought a preliminary injunction to enforce the SRA, which included a non-compete period of one year. McCauley resigned effective 6/27/2003. Medline purchased the assets of Maxxim's business in October, 2003. The Adversary Proceeding commenced in October, 2003. The Bankruptcy Court found that Maxxim did not prove the existence of one or more legitimate business interests justifying the enforcement of its covenant not to compete, nor did Maxxim prove the elements of any of its claims for relief for damages. The Bankruptcy Court further noted that the trial of this case concluded three years after the acts occurred that form the basis of the request for injunctive relief. The trial took place after the confirmation of the Plan. Pursuant to its purchase, Medline owned Maxxim's CPT business at that time. The entry of an injunction, even if it had been appropriate at one time, would not have preserved the property of the estate, or prevented a violation of the automatic stay.
The Court recognizes that, under Florida law, an injunction may be equitably extended to run from the date of entry of the injunction order. Capelouto v. Orkin Exterminating Co. of Fla., Inc., 183 So.2d 532 (Fla. 1966). The Bankruptcy Court did not find the facts of this case appropriate to enter injunctive relief, or to equitably extend injunctive relief. Maxxim and Medline argue that they could not have feasibly sought a preliminary injunction, since McCauley contended that McCauley's version of the SRA was in effect. An evidentiary hearing on a motion for preliminary injunction could have resolved that issue, if Maxxim and Medline had sought a preliminary injunction to prevent further harm.
The harm that a declaratory judgment was intended to prevent is long past. The Court has affirmed the finding of the Bankruptcy Court as to the absence of a legitimate business interest justifying the enforcement of the covenant not to compete in the SRA.
The Court concludes that the Bankruptcy Court did not abuse its discretion in finding the request for injunctive relief to be moot.
2. Ch. 688.003, Florida Statutes
Actual or threatened misappropriation of a trade secret may be enjoined.
The Bankruptcy Court found the information, products and documents that Maxxim and Medline considered to be trade secrets were not trade secrets. The Court has affirmed the Bankruptcy Court's findings and conclusions as to trade secrets. Therefore, Maxxim and Medline cannot establish the requirements necessary to grant injunctive relief as to trade secrets.
3. Ch. 501.211(2), Florida Statutes
Ch. 501.21(2) provides that any act or practice in trade or commerce that is violating, has violated or is otherwise likely to violate this section (the FDUTPA) may be enjoined.
The Bankruptcy Court concluded that no act of PHS or McCauley violated the FDUTPA, or caused Maxxim's and Medline's damages. The Court has affirmed the findings and conclusions of the Bankruptcy Court.
Therefore Maxxim and Medline cannot establish the requirements necessary to grant injunctive relief under FDUPTA.
The Court affirms the findings and conclusions of the Bankruptcy Court denying the request for injunctive relief.
J. Award of Costs
Bankruptcy Court Abused Its Discretion in Awarding Costs to PHS and McCauley
Maxxim and Medline argue that the Bankruptcy Court did not state any reason to award costs to PHS and McCauley, and did not explain its rationale for the purposes of review.
Maxxim and Medline argue that there is a substantial record of misconduct by PHS and McCauley in this case that weighs heavily against the award of costs to PHS and McCauley, including the duplicate original SRA, the redaction of an e-mail, deleting language to show McCauley worked for PHS while employed by Maxxim, false testimony about the redacted e-mail, and the disregard of the Court's instructions regarding sequestration and coaching of witnesses.
The allowance of costs under Bankruptcy Rule 7054(b) is within the discretion of the Bankruptcy Court. The Court notes that this multi-count case was heavily contested and required an extended trial. The Bankrupty Court has broad discretion to determine whether and to what extent to award costs to the prevailing parties. There is a strong presumption favoring the award of costs to the prevailing party. . . . The losing party must satisfy a heavy burden when asserting that he should be excused from paying costs and affirmatively establish that the costs either fall outside the parameters of Sec. 1920, were not reasonably necessary to the litigator, or that the losing party is unable to pay. In re O'Callaghan, 304 B.R. 887 (M.D. Fla. 2003) (citing In re Franklin Arms Court, L.P., 2003 WL 1883472 at *14).
The Bankruptcy Court did not err in not including detailed findings as to costs; if the motion for costs had been denied, such findings would have been necessary to explain the Bankruptcy Court's conclusion. PHS and McCauley were the prevailing parties, and he Bankruptcy Court granted the award of costs to PHS and McCauley as prevailing parties.
The Court affirms the decision of the Bankruptcy Court as to the award of costs to PHS and McCauley.
K. Relief Requested
Maxxim and Medline request that the Court vacate the Bankruptcy Court's Final Judgment and enter a judgment for Maxxim and Medline on all Counts of the Complaint. The Court has affirmed the findings and conclusions of the Bankruptcy on all Counts and therefore denies the request to vacate the Bankruptcy Court's Final Judgment.
VIII. The Cross-Appeal 1) Denial of Motion to Amend to Assert Additional Defense
PHS and McCauley argue that this Adversary Proceeding is not identified as a "retained cause of action" in the Plan Supplement which identifies the causes of action which will be transferred to reorganized Maxxim upon emergence from bankruptcy. PHS and McCauley argue that a reorganized debtor may not pursue a cause of action if the cause of action has not been retained under a plan of reorganization. A cause of action that has not been retained is subject the defenses of res judicata or lack of standing. D K Props. Crystal Lake v. Mutual Life Ins. Co., 112 F.3d 257, 261 (7th Cir. 2004); Browning v. Levy, 283 F.3d 761, 774-75 (6th Cir. 2002)
The Bankruptcy Court conducted a hearing on PHS' and McCauley's Motion to Amend. (17:172-206).
The Bankruptcy Court noted that PHS and McCauley could have and should have brought their Motion to Amend earlier. This case was pending when the Plan was confirmed, but no motion was brought until 17 months afterward, after discovery, dispositive motions and commencement of the trial. The Bankruptcy Court considered res judicata inapplicable, since the purpose of that equitable defense is to put an end to litigation, and this case was being prosecuted at the time of confirmation.
The Bankruptcy Court interpreted the Plan not to preclude a pre-existing adversary action, and found that Maxxim and Medline would be prejudiced if the Bankruptcy Court permitted the amendment. The Bankruptcy Court further found that the delay of PHS and McCauley constituted a waiver, and Maxxim and Medline retained constitutional and prudential standing after the Plan was confirmed.
For all of the reasons outlined at the hearing, the Court affirms the denial of the Motion to Amend Answer.
2) Denial of Motion to Amend to Assert Claim for Attorney's Fees
PHS and McCauley argue that the Bankruptcy Court erred in denying their motion to amend their Answer to assert a claim for attorney's fees. PHS and McCauley argue that the Bankruptcy Court had the discretion to award fees under Ch. 542.335(k), Florida Statutes (2005), and Ch. 688.005, Florida Statutes (2005). PHS and McCauley argue that many cases have held that attorney's fees may be recovered, even where the pleadings have not contained a claim for damages. PHS and McCauley argue that lack of prejudice and fairness to the prevailing party support a fee award in this case.
The Bankruptcy Court conducted a hearing on the Motion to Amend (20:42-64).
At the hearing, PHS and McCauley conceded that Fed.R.Bank.P. 7008(b) requires attorney's fees to be specifically pled. The Bankruptcy Court noted that, in addition to Bankruptcy Rule 7008, Rule 26 requires all damages to be disclosed. The request for attorney's fees was not included in the initial pleadings or in any pretrial order. PHS and McCauley raised their request for the award of attorney's fees after PHS and McCauley had rested. The Bankruptcy Court noted that Maxxim and Medline asserted their request for the award of attorney's fees early, and through their Rule 26 disclosures. Maxxim and Medline included evidence establishing their attorney's fees during trial. The Bankruptcy Court applied Bankruptcy Rule 7008(b), and denied the Motion to Amend to assert a claim for attorney's fees.
The Bankruptcy Court did not err in denying the Motion to Amend due to the application of Bankruptcy Rule 7008 and prejudice to Maxxim and Medline from the late attempt to include attorney's fees as an element of damages. Nothing prevented PHS and McCauley from asserting the claim for attorney's fees from the outset.
The Court affirms the Bankruptcy Court's denial of the Motion to Amend as to the claim for attorney's fees.
IX. The Consolidated Appeal A. Denial of Motion for Award of Attorney's Fees
PHS and McCauley argue that the Bankruptcy Court erred in denying their Motion for Award of Attorney's Fees. PHS and McCauley request that the Court reverse the judgment of the Bankruptcy Court and remand this case for the determination of attorney's fees.
The appeal of PHS and McCauley is based on the inherent power of the Bankruptcy Court to sanction "bad faith" and "willful misconduct" even in the absence of express statutory authority. The inherent power of the court to sanction is derived from the court's need to manage its own affairs so as to achieve the orderly and expeditious disposition of cases. Chambers v. Nasco, 501 U.S. 32, 43 (1991).
PHS and McCauley argue that Maxxim and Medline pursued a broad "trade secret" misappropriation claim against PHS and McCauley in bad faith. Maxxim and Medline raised other claims, and the Motion of PHS and McCauley is limited to the claim that PHS and McCauley stole the trade secrets of Maxxim and Medline.
PHS and McCauley argue that the procedural history of this case demonstrates the bad faith of Maxxim and Medline. PHS and McCauley argue that Maxxim and Medline claimed all the information in their business was a trade secret, and that Maxxim and Medline labeled every trial exhibit "highly confidential" or "confidential." PHS and McCauley argue that Maxxim and Medline opposed the Motion to strike the some of the designations in bad faith, but at trial Maxxim and Medline did not seek "highly confidential" treatment.
PHS and McCauley argue that Maxxim and Medline persisted in their claim that pricing was confidential, but at a hearing of 9/20/2004 admitted that pricing was not confidential. PHS and McCauley argue that Maxxim and Medline never sought a protective order, and objected to the standard protective order sought by PHS and McCauley, and withheld documents sought in discovery but objected to the extension of the discovery deadline sought by PHS and McCauley. PHS and McCauley assert that they filed numerous motions to compel to obtain documents that were not produced until an order was entered on the motions to compel.
A finding of "bad faith" is warranted where an attorney knowingly or recklessly raises a frivolous argument, or argues a meritorious claim for the purpose of harassing an opponent. A party also demonstrates bad faith by delaying or disrupting litigation or hampering enforcement of a court order. Byrne v. Nezhat, 261 F.3d 1075, 1121 (11th Cir. 2001). In order to grant sanctions based on its inherent powers, the Court would first have to find that Maxxim and Medline proceeded in "bad faith." It troubles the Court that, according to the Letter Agreement of 9/2/2003 between McCauley and PHS, Maxxim conceded that a past employee had the right to use and disclose the information designated within the Letter Agreement, even if it might otherwise be considered by Maxxim to be a trade secret: a) generalized knowledge, skill and experience developed over the years and acquired while working for Maxxim; b) information that Maxxim might otherwise consider to be trade secrets but which has become a matter of public knowledge; c) Information that Maxxim might otherwise consider to be a trade secret but which is possessed by a third party; d) Information know to PHS about Maxxim. (PHS 0008).
At the hearing on the Motion for the Award of Attorney's Fees, the Bankruptcy Court noted that the designation of all documents as confidential was not appropriate, and that the tactic of constant objections during depositions was ineffective and inappropriate, but Rule 11 and Rule 37 motions could have resolved those issues. PHS and McCauley did not file Rule 11 and Rule 37 motions. The Bankruptcy Court considered the tactics in this case to be far short of a Chambers v. Nasco scenario.
The Court may resort to its inherent powers to impose attorney's fees for bad faith conduct where other sanctioning mechanisms do not cover the conduct at issue. Where Rule 11, Rule 37 or some other mechanism would cover the conduct at issue, the Court ordinarily should not resort to its inherent powers, which are to exercised with caution and restraint. Chambers v. Nasco, 501 U.S. 32, 50 (1991); Peer v. Lewis, 606 F.3d 1306, 1315 (11th Cir. 2010).
The Court concludes that the Bankruptcy Court did not abuse its discretion in denying the Motion for the Award of Attorney's Fees of PHS and McCauley, and affirms the denial of the Motion. Accordingly, it is
ORDERED that the Findings of Fact and Conclusions of Law, Final Judgment, and Orders of the Bankruptcy Court are affirmed as to all issues raised in the Appeal, Cross-Appeal, and Consolidated Appeal.
DONE and ORDERED in Chambers, in Tampa, Florida.