Opinion
No. 2D20-904
06-17-2022
PRECISION ORTHOPEDICS, INC., Appellant, v. ZIMMER US, INC. d/b/a Zimmer Biomet; Medtech Southeast, Inc.; and Orthopedics, Inc., Appellees.
Marie Tomassi, Stanley H. Eleff, and Ashlyn R. Banks, of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, P.A., St. Petersburg; and Frederick J. Mills, of Morrison & Mills, P.A., Tampa, for Appellant. Kelli A. Edson and Drew Patrick O'Malley, of Quarles & Brady, LLP, Tampa; and Troy S. Brown, Margot G. Bloom, and Amanda F. Lashner, of Morgan, Lewis & Bockius, LLP, pro hac vice, Philadelphia, Pennsylvania, for Appellees.
Marie Tomassi, Stanley H. Eleff, and Ashlyn R. Banks, of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, P.A., St. Petersburg; and Frederick J. Mills, of Morrison & Mills, P.A., Tampa, for Appellant.
Kelli A. Edson and Drew Patrick O'Malley, of Quarles & Brady, LLP, Tampa; and Troy S. Brown, Margot G. Bloom, and Amanda F. Lashner, of Morgan, Lewis & Bockius, LLP, pro hac vice, Philadelphia, Pennsylvania, for Appellees.
STARGEL, Judge.
This dispute arises among several parties who entered into a series of written agreements (including multiple addenda) related to the sale of products in specified regions of Florida from 2004 to 2018. Zimmer US, Inc., d/b/a Zimmer Biomet (Zimmer) and two of its distributors, Medtech Southeast, Inc., and Orthopedics, Inc. (the Distributor Defendants), were defendants in the Original Complaint and subsequent Amended Complaint filed by Precision Orthopedics, Inc. The trial court dismissed the Original Complaint without prejudice and later dismissed the Amended Complaint with prejudice. Because the trial court looked beyond the four corners of the Amended Complaint and did not accept as true all well-pleaded allegations when it granted the motion to dismiss, we must reverse and remand for further proceedings.
On March 9, 2004, Precision and Zimmer entered into an agreement (the Representative Agreement) making Precision the sales representative for Zimmer's medical devices in a territory comprised of twenty-two counties in Florida. Under its terms, the Representative Agreement became effective on April 1, 2004, and expired on December 31, 2013, unless extended at Zimmer's "sole discretion." The Representative Agreement granted Precision the right to solicit orders for specific Zimmer products, which included "certain orthopedic implants and devices and other medical products, services, and supplies." The Representative Agreement gave Zimmer broad discretion in carrying out its terms, including the right to determine which products Precision had the right to sell and in which territory.
Prior to the Representative Agreement, the principal owner of Precision, George Etheridge, sold his controlling interest in Precision. Despite this sale, Zimmer wished for Etheridge to remain in his current position at Precision and to perform the services required under the Representative Agreement. Thus, on the same day the Representative Agreement was executed, the parties separately executed an addendum to the contract (the 2004 Addendum) as a "bargain to keep Etheridge on the job" for five more years. In return, Zimmer agreed to give up, temporarily, some of its reserved discretion over Precision's selling capacity as well as to pay Etheridge $10 million over five years. The 2004 Addendum set out incentive-based installment payments, which were due and payable to Etheridge on December 31 of each calendar year starting in 2004 and ending on December 31, 2008—the date on which the 2004 Addendum expired pursuant to its terms. At the same time, the Representative Agreement's term expressly remained unchanged and was set to continue through December 31, 2013. After the 2004 Addendum, the parties subsequently entered into five additional addenda to the Representative Agreement over the life of their relationship.
In June 2015, Zimmer's then-parent company, Zimmer Holdings, Inc., acquired and merged with one of its largest competitors, Biomet, Inc., and all of its subsidiaries. Following the acquisition, Zimmer Holdings, Inc., became Zimmer Biomet Holdings, Inc.
Although Zimmer became known as "Zimmer Biomet" after the merger, for the purposes of this opinion, we refer to both Zimmer and Zimmer Biomet as Zimmer.
Prior to the acquisition, Biomet had agreements with the Distributor Defendants to sell and distribute Biomet's products in territories that overlapped with the territories in which Precision distributed and sold Zimmer products. Following the merger, Zimmer reiterated to Precision that it intended to keep the status quo: Precision would continue selling and distributing only so-called "legacy" Zimmer products, and the Distributor Defendants would continue selling and distributing legacy Biomet products. Precision expressed its displeasure with Zimmer's decision but continued selling legacy Zimmer products in its assigned territory for the next three and one-half years (until the expiration of the Representative Agreement, which had been extended to December 31, 2018, by virtue of the parties’ 2013 Addendum). As the Representative Agreement approached its expiration date, Precision and Zimmer were unable to mutually agree to terms under which they could continue their relationship. Accordingly, the companies did not agree to an extension of the Representative Agreement, and it expired of its own terms on December 31, 2018.
On February 14, 2019, Precision filed its Original Complaint. Relying on the 2004 Addendum, Precision brought two claims for breach of contract, alleging that Zimmer had breached the Representative Agreement and 2004 Addendum by (i) failing to allow Precision to sell Biomet products in its assigned territory and (ii) failing to pay Precision for commissions on sales of Biomet products in Precision's assigned territory made by the Distributor Defendants. Precision also sought a declaration that it was no longer bound by the noncompete or confidentiality clauses in the Representative Agreement because Zimmer had allegedly breached that contract. Additionally, Precision brought claims against the Distributor Defendants for interfering with its contractual rights under the Representative Agreement and 2004 Addendum. The Original Complaint relied solely on the plain language of the Representative Agreement and 2004 Addendum. Precision argued that "the 2008 Addendum operated to extend the term of the 2004 Addendum" when it incorporated the 2004 Addendum by reference. Zimmer and the Distributor Defendants moved to dismiss all claims against them.
The trial court found that "[n]one of the additional addenda altered the material provisions of the [Representative] Agreement and the 2004 Addendum." The trial court noted that "[t]he recitations specifically say the [2004] Addendum is for the purpose of securing the continued services of Etheridge" and that "[n]o permanent structural change to the Parties’ relationship is mentioned" in the 2004 Addendum. While the trial court recognized the possibility that the parties could have intended to permanently expand the scope of Precision's exclusivity and constrain Zimmer's discretion when it entered the 2004 Addendum—even "without mentioning it in the recitations"—both of those occurrences would be "unusual and unexpected." The trial court accordingly held that the 2004 Addendum was unambiguous, finding that "in order to conclude the Parties intended to fundamentally alter the base contract the language would have to say so clearly."
The trial court also recognized that "different provisions in a contract can have different effective timespans, depending on the language used," citing St. Johns Investment Management Co. v. Albaneze , 22 So. 3d 728 (Fla. 1st DCA 2009). The court found that "[t]he fatal flaw in Precision's argument is that any subsequent contract that would ‘incorporate by reference’ the 2004 Addendum would incorporate the whole addendum, including its definition of ‘Addendum Term.’ " The meaning of "Addendum Term" in the 2004 Addendum "could not change when another document incorporated it by reference. The incorporating document is bound by the terms of the incorporated document, not the other way around." The trial court concluded that although "[p]arts of the 2004 Addendum may still be viable today, ... each part must be read individually to determine its continuing vitality" and that the Original Complaint failed to state a claim for breach of contract or tortious interference because those claims "depend on contractual provisions that are long expired" pursuant to the terms of the "Addendum Term" provision in the 2004 Addendum. The trial court also dismissed the declaratory claim because Precision failed to allege a real and present controversy. Additionally, the court dismissed the two counts against the Distributor Defendants because they alleged "tortious interference with [expired] contracts."
In its Amended Complaint, Precision raised the same counts as before but provided more detailed information on the relationship and added a count alleging that Zimmer failed to pay commissions due from the 2013 Addendum on Zimmer products sold before December 31, 2018 (an amount Precision estimated to be between $30,000 and $40,000). Additionally, in its Amended Complaint, Precision sought to avoid its earlier assertion that the contract was unambiguous by newly alleging that "notwithstanding the ‘Addendum Term’ " in the 2004 Addendum, parol evidence highlighting the parties' "course of dealing and intent" should be considered.
The trial court again dismissed Precision's claims. The court found that the new allegations "still do not escape the plain language of the contract as expressed in the previous order." Thus, the court reasoned it did not appear that Precision's Amended Complaint had a pleading problem—it was a "substantive issue of the interpretation of the contracts" that yielded the result. The trial court dismissed all counts with prejudice but offered Precision the opportunity to file a motion seeking leave to amend. Precision declined to seek leave to amend, and this appeal followed.
We originally lacked jurisdiction over this appeal as the order on appeal merely granted a motion to dismiss with prejudice without dismissing the action, which is not an appealable order. See McManus v. Gamez , 276 So. 3d 1005, 1007 (Fla. 2d DCA 2019). The court's standard order for this situation was issued, and a final order was procured pursuant to Florida Rule of Appellate Procedure 9.110(l ) related to premature appeals. Thus, this court now has jurisdiction pursuant to Florida Rule of Appellate Procedure 9.030(b)(1)(A).
We must determine whether the trial court erred in dismissing the Amended Complaint with prejudice. In considering a motion to dismiss, the trial court must confine its review to the four corners of the complaint, draw all inferences in favor of the pleader, and accept all well-pleaded allegations as true. City of Gainesville v. Dep't of Transp. , 778 So. 2d 519, 522 (Fla. 1st DCA 2001) ; see also Alevizos v. John D. & Catherine T. MacArthur Found. , 764 So. 2d 8, 9 (Fla. 4th DCA 1999) ("[A] court's gaze is limited to the four corners of the complaint, including the attachments incorporated in it, and all well pleaded allegations are taken as true."). We review a trial court's order granting a motion to dismiss de novo. See Swope Rodante, P.A. v. Harmon , 85 So. 3d 508, 509 (Fla. 2d DCA 2012). "In the context of a motion to dismiss, the plain language of each contract must be scrutinized along with the complaint to determine if sufficient ultimate facts are pleaded to state a claim for relief." Coleman v. 688 Skate Park, Inc. , 40 So. 3d 867, 869 (Fla. 2d DCA 2010). Additionally, this court in Consuegra v. Lloyd's Underwriters at London , 801 So. 2d 111, 112 (Fla. 2d DCA 2001), reversed the trial court's conclusion that Lloyd's did not breach its contract with Mr. Consuegra, noting:
[A] motion to dismiss for failure to state a cause of action is not a substitute for a motion for summary judgment, and in ruling on such a motion, the trial court is confined to a consideration of the allegations found within the four corners of the complaint. Cyn-co, Inc. v. Lancto, 677 So. 2d 78, 79 (Fla. 2d DCA 1996). We do not find that the plain language of the contract in this case unambiguously established that Lloyd's did not breach the duty alleged in the complaint.
It is undisputed that when the parties executed the Representative Agreement and the 2004 Addendum, they intended that those two documents would govern the parties’ business relationship until the end of 2008. The trial court concluded that the Representative Agreement, as modified by the 2004 Addendum, was the operative document governing the parties’ relationship. The Representative Agreement as signed in 2004 had a term that extended through 2013, but the 2004 Addendum was set to expire on December 31, 2008.
Precision argues that the 2004 Addendum applies because it was contemplated by subsequent addenda. The trial court, however, found that the recitations in the 2004 Addendum related to the purpose of retaining Ethridge and were not meant to permanently alter the parties’ relationship as defined in the Representative Agreement, specifically noting that "different provisions in a contract can have different effective timespans, depending on the language used." See also St. Johns Inv. Mgmt. Co. , 22 So. 3d 728. The trial court also determined extrinsic evidence was unnecessary to determine the parties’ intent because of the plain language of the document.
Precision argues that the divergent interpretations of whether the addenda constituted a permanent alteration beyond the purpose of retaining Etheridge demonstrates an ambiguity that cannot be resolved on a motion to dismiss. Precision further argues that it is not required to explain why the 2004 Addendum was extended in order to survive a motion to dismiss. In its Amended Complaint, Precision expanded its explanation of the contractual history between the parties describing in depth its position that the parties continued to operate under the terms of the Representative Agreement, as modified by all addenda including the 2004 Addendum, even after its purported expiration date.
The trial court stated in its order dismissing the Amended Complaint that
[t]he plaintiff's opposition memorandum ... and argument in court make an elegant presentation but still do not escape the plain language of the contract as expressed in the previous order. The last two counts fall with the first four.
It does not appear to be a problem with pleading, but rather a substantive issue of interpretation of the contracts, that yields this result.
We agree with Precision that the Amended Complaint recounted many examples of conduct that at a minimum created issues that could not properly be resolved on a motion to dismiss. The trial court was required to limit its review at this stage to the four corners of the Amended Complaint and accept as true all well-pleaded allegations. Precision's course-of-conduct assertions contained in the Amended Complaint had to be considered. The trial court erred when it instead made ultimate findings regarding the relationship of the parties through their agreements on a motion to dismiss based solely on the language of the contract. See Consuegra , 801 So. 2d at 112. The plain language of this contract did not preclude Precision's claims, and it was error to dismiss the related claims in the Amended Complaint with prejudice for failure to state a cause of action.
Finally, we note that the trial court's order did not specifically address the new count in the Amended Complaint alleging that Zimmer failed to pay certain commissions owed on the sale of legacy Zimmer products through 2018 according to the 2013 Addendum. This allegation is, of course, distinct from the contract claims in which Precision seeks damages under the 2004 Addendum for the sale of legacy Biomet products. The dismissal of this count must also be reversed because, as previously stated, a motion to dismiss cannot go beyond the four corners of the Amended Complaint, and the allegation that these outstanding commissions are owed must be accepted as true as "well-pleaded allegations." See City of Gainesville , 778 So. 2d at 522. The request for declaratory relief and the counts against the Distributor Defendants must further be reversed because the allegations therein must be accepted as true under a motion-to-dismiss analysis. We likewise see nothing in the plain language of the contracts at issue that would otherwise require dismissal of these claims.
We do not comment on the merit of the trial court's analysis of the agreements in this case. Rather, we simply hold that such analysis was improper based on the specific allegations of the course of conduct between the parties contained in the Amended Complaint. The granting of the motion to dismiss was improper.
Reversed and remanded.
LUCAS and SMITH, JJ., Concur.