Medison America, Inc. v. Preferred Medical Systems, LLC , 357 F. App'x 656 ( 2009 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 09a0809n.06
Nos. 07-6470, 08-5325 FILED
Dec 18, 2009
UNITED STATES COURT OF APPEALS LEONARD GREEN, Clerk
FOR THE SIXTH CIRCUIT
MEDISON AMERICA, INC., )
)
Plaintiff-Appellant, )
)
v. ) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR
PREFERRED MEDICAL SYSTEMS, LLC, ) THE WESTERN DISTRICT OF
JERRY K. MCGUIRE, and GREGG REED, ) TENNESSEE
)
Defendants-Appellees. )
)
)
Before: MOORE and KETHLEDGE, Circuit Judges; and BERTELSMAN, District Judge.*
KETHLEDGE, Circuit Judge. Medison America, Inc. (“Medison”) appeals the district
court’s grant of summary judgment in favor of Preferred Medical Systems, LLC, Jerry K. McGuire,
and Gregg Reed (collectively, “Preferred”) with respect to Medison’s claims under the Lanham Act
and the statutory and common law of various states. Medison also appeals several of the district
court’s discovery orders and its award of costs to Preferred. We affirm.
I.
Medison is a subsidiary of Medison Company Limited, a Korean manufacturer of ultrasound
equipment. Medison sells its equipment wholesale to dealers who then resell the equipment to
*
The Honorable William O. Bertelsman, United States District Judge for the Eastern District
of Kentucky, sitting by designation.
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Medison Am., Inc. v. Preferred Med. Sys., LLC
medical providers. Medison competes with General Electric, which manufactures ultrasound
equipment that it sells through its own representatives. Preferred Medical Systems, LLC is one such
representative; McGuire is its owner, and Reed an employee.
Medison alleges that Preferred told prospective customers that Medison was in bankruptcy
and unable to service its ultrasound equipment (the “Medison Story”). According to Medison,
Preferred knew the Story was false, and told the Story to prospective customers in Alabama, Georgia,
Mississippi, and Tennessee.
Medison filed this action in federal court, asserting claims under the Lanham Act, 15 U.S.C.
§ 1125(a)(1), and the trade-disparagement and antitrust statutes of various states. Medison also
asserted state common-law claims for fraud, commercial disparagement, conspiracy to injure
business, conversion, and tortious interference with business relations.
The parties thereafter engaged in discovery and motion practice. During the course of
discovery, Preferred obtained a protective order quashing one of Medison’s subpoenas and limiting
the scope of two depositions. In addition, shortly before the discovery deadline, Medison moved to
depose 17 additional witnesses after the deadline. The district court denied the motion.
At that point—after 22 months of litigation in federal court—Medison filed an essentially
identical action in Tennessee state court. Medison then filed a motion in the district court, asking
it to abstain from exercising jurisdiction in the case. Medison also moved to amend its complaint
in the federal action, to strip out from it the allegations giving rise to federal jurisdiction. The district
court denied both motions.
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Preferred separately moved for summary judgment. The district court granted that motion.
This appeal followed.
II.
A.
Medison challenges the district court’s denial of its motion to abstain from exercising
jurisdiction over the case. We review that denial for an abuse of discretion. Great Earth Cos. v.
Simons, 288 F.3d 878, 886 (6th Cir. 2002).
Medison argues that the district court was required to abstain under the rule stated in Younger
v. Harris, 401 U.S. 37 (1971). That argument is meritless, given that Medison itself brought this
case in federal court and then filed essentially the same suit in state court two years later in a brazen
attempt to forum-shop.
Medison next argues that the district court should have abstained on prudential grounds.
Although federal courts have a “virtually unflagging obligation . . . to exercise the jurisdiction given
them[,]” in rare circumstances a district court may decline to exercise jurisdiction in the interest of
judicial efficiency. Colo. River Water Conserv. Dist. v. United States, 424 U.S. 800, 817-18 (1976).
Here, the district court correctly observed that two considerations—namely, that the federal suit was
filed first, and the relative progress of the state and federal cases—favored exercising jurisdiction.
No consideration favored abstention. We have no quarrel with those findings. The district court did
not abuse its discretion by denying Medison’s motion to abstain.
Medison argues that its abstention motion should have been treated as a motion for voluntary
dismissal under Federal Rule of Civil Procedure 41(a)(2). For two reasons, this argument is
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unavailing. First, no motion was ever made under Rule 41(a)(2), so it would be unfair to fault the
district court for not abstaining or dismissing under that rule. Second, the rule states that “an action
may be dismissed at the plaintiff’s request only by court order, on terms that the court considers
proper.” Clearly, the district court did not think it proper to relinquish the case so that Medison
could prosecute its claims in state court, given how far the litigation had developed.
Medison also appears to argue that the district court lost jurisdiction over the case once
Medison filed its motion to amend the complaint. The proposed amendments would have stripped
the complaint of its allegations giving rise to federal jurisdiction. Those amendments never took
effect, however, because the district court denied leave to make them. See Fed. R. Civ. P. 15(a)(2).
The district court did not abuse its discretion in doing so, given that the proposed amendments were
a transparent attempt to manipulate the court’s jurisdiction nearly two years after Medison itself had
invoked that jurisdiction. See Foman v. Davis, 371 U.S. 178, 182 (1962) (citing “bad faith” as a
reason to deny leave to amend). We therefore reject this argument as well.
B.
Medison also challenges three of the district court’s discovery orders. We review those
orders for an abuse of discretion. Bowling v. Pfizer, Inc., 102 F.3d 777, 780 (6th Cir. 1996).
Medison argues that the district court wrongly entered a protective order that quashed a
subpoena for one deposition and limited the scope of two others. Medison sought to take these
depositions primarily to obtain testimony regarding alleged sexual misconduct completely
unconnected with this commercial dispute. The sexual inquiries appeared to have no purpose apart
from litigation in terrorem; and the district court did not abuse its discretion by prohibiting them.
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Medison also sought testimony regarding McGuire’s resale of used ultrasound equipment, among
similar matters, in transactions unrelated to this case. But here too, the district court sought simply
to limit discovery to issues relevant to this case. The court did not abuse its discretion in doing so.
On July 9, 2006, the district court entered a joint scheduling order setting the deadline for all
depositions as March 30, 2007. On March 13, 2007, Medison moved to enlarge the time for
depositions. Judge Vescovo held a telephonic hearing on the motion on March 16, 2007 and denied
the motion by written order on March 19, 2007. In that order, however, she permitted the deposition
of 17 physicians upon written questions, noticed by Medison for March 30, 2007. Shortly thereafter,
Medison canceled those depositions and sought reconsideration of the court’s denial of its motion
to extend discovery. Following a hearing, the court denied the motion by electronic order written
into the docket on July 26, 2007. Medison claims this was error.
Medison’s argument proceeds as follows: The 17 witnesses live more than 100 miles from
the court and cannot be subpoenaed to appear in court. Their testimony would have to be secured
by deposition so that the transcripts could be submitted at trial. In this way, the depositions would
be the equivalent of trial testimony. Because witnesses appearing in person need not be deposed
before trial, Medison asserts it had no obligation to depose the 17 witnesses by the discovery
deadline.
For three reasons, we find that the district court did not abuse its discretion. First, if Medison
intended to depose witnesses for the purpose of memorializing testimony that could be introduced
in transcript form as part of its case-in-chief at trial, it could have asked for a separate, later deadline
for those depositions to be put into the scheduling order. This is especially true if Medison intended
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to introduce evidence from those 17 witnesses at the summary-judgment stage. Second, the fact that
the district court set March 30, 2007 as the deadline for “all depositions” in its order of March 19th
makes it reasonable for the defendants to expect that there would be no further depositions of any
kind after that date. Third, Medison offers no evidence that it was prejudiced by not being able to
take the depositions. See In re Air Crash Disaster, 86 F.3d 498, 516 (6th Cir. 1996) (“Matters of
docket control and conduct of discovery are committed to the sound discretion of the district court.
We will not interfere with a trial court’s control of its docket except upon the clearest showing that
the procedures have resulted in actual and substantial prejudice to the complaining litigant”) (internal
quotation marks omitted).
Finally, Medison argues that the district court’s order regulating depositions by written
questions misapplied Federal Rule of Civil Procedure 31. Normally, under this rule, the parties serve
upon each other, at specified intervals, their respective direct, cross-examination, and redirect
questions for the deponent, see Fed. R. Civ. P. 31(a); and then they serve all of the questions upon
the deponent in one batch. Here, Medison’s announcement of its intention to take such depositions
came too late in the discovery period for the parties to exchange their questions before the discovery
deadline. So the district court ordered Medison to serve its questions on the deponent first, with
Preferred and then Medison serving their cross-examination and redirect questions, respectively,
after reviewing the deponent’s responses to the preceding questions. We see no abuse of discretion
in this process under the circumstances present here. And in the end, Medison never even served
its written questions upon the deponent, which prevents it from demonstrating any prejudice. See
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generally Trepel v. Roadway Express, Inc., 194 F.3d 708, 716 (6th Cir. 1999). Medison’s argument
is meritless.
C.
Medison next challenges the district court’s summary-judgment order. “This Court reviews
a district court’s grant of summary judgment de novo.” Moses v. Providence Hosp. & Med. Ctrs.,
Inc., 561 F.3d 573, 578 (6th Cir. 2009). Summary judgment is appropriate “if the pleadings, the
discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as
to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(c). “[A] complete failure of proof concerning an essential element of the nonmoving party’s case
necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
The evidence cited by the nonmovant must be admissible at trial. See Alpert v. United States, 481
F.3d 404, 409 (6th Cir. 2007).
Medison first argues that the district court misallocated the burden of proof for Preferred’s
motion by requiring Medison to prove that summary judgment was improper. But Medison was
required to produce “evidence on which the jury could reasonably find” in its favor as to each
element of its claims. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). Here, Preferred
“point[ed] out to the district court that there [was] an absence of evidence to support [Medison’s]
case.” Celotex, 477 U.S. at 325. In ruling on that ground, the district court did not misallocate any
burden with respect to Preferred’s motion.
Medison next argues that it produced sufficient evidence to withstand summary judgment
on each of its many claims. We turn first to its Lanham-Act claim, which requires proof of “some
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causal link between the challenged statements and harm to the plaintiff.” Am. Council of Certified
Podiatric Physicians & Surgeons v. Am. Bd. of Podiatric Surgery, Inc., 185 F.3d 606, 613 (6th Cir.
1999). Medison had no such proof here. In opposing Preferred’s motion, Medison submitted two
affidavits, both allegedly from prospective customers who had heard the Medison Story. But one
affiant, Dr. Austin, bought Medison’s products despite the Story. The other, Dr. Sigman, says only
that Preferred’s sales pitch—including the Story—caused him not to buy from Preferred. Neither
of those affidavits, therefore, prove that the Story harmed Medison. Medison now cites its verified
complaint as proof, but the complaint offers legal conclusions rather than testimony on this point.
See Cloverdale Equip. Co. v. Simon Aerials, Inc., 869 F.2d 934, 937 (6th Cir. 1989).
At oral argument, Medison introduced a theory that the Story harmed Medison by forcing it
to expend extra money and effort to sell its products. As an initial matter, Medison’s opening brief
did not clearly articulate this theory, so it was waived. See Langley v. DaimlerChrysler Corp., 502
F.3d 475, 483 (6th Cir. 2007) (concluding that “issues not fully developed and argued were waived”)
(internal quotation marks omitted). Moreover, the record contains no evidence showing that
Medison actually made such expenditures. Consequently, Medison has not created a genuine issue
of material fact as to this theory. Summary judgment as to Medison’s Lanham-Act claim was
therefore proper.
Several of Medison’s state-law statutory claims for trade-disparagement likewise require
proof of causation. These claims include Medison’s claim under Tennessee Code § 47-18-104, see
Tucker v. Sierra Builders, 180 S.W.3d 109, 115 (Tenn. Ct. App. 2005) (holding that the provision
creating a private cause of action under the statute requires proof of causation); its claim under
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Alabama Code § 8-19-5, see Billions v. White & Stafford Furniture Co., 528 So. 2d 878, 880 (Ala.
Civ. App. 1988) (same); and its claim under Georgia Code § 10-1-372, see Friedlander v. HMS-PEP
Prods., Inc., 485 S.E.2d 240, 242 (Ga. Ct. App. 1997) (same). Each claim fails for the reasons stated
above.
Medison asserts claims under the antitrust statutes of Tennessee, see Tenn. Code Ann. § 47-
25-101, and Mississippi, see Miss. Code Ann. § 75-21-1. In Tennessee, a plaintiff must prove that
the defendant entered into an anticompetitive agreement that “affects Tennessee trade or commerce
to a substantial degree.” Freeman Indus., LLC v. Eastman Chem. Co., 172 S.W.3d 512, 523 (Tenn.
2005). The only effects that Medison cites here are its own alleged injuries, which do not amount
to a “substantial” effect on Tennessee trade or commerce as a whole. See id. For the Mississippi
claim, Medison similarly must show that Preferred monopolized, or attempted to monopolize, a
particular market in Mississippi. See Wicker v. Union County Gen. Hosp., 556 So. 2d 297, 300
(Miss. 1989). Medison has produced no evidence of that here. The antitrust claims therefore fail.
A bushel of common-law claims remain. Medison offers no distinctions between the laws
of the various states under which it asserts these claims, so we analyze them under general common-
law principles. Medison asserts claims for trade disparagement and tortious interference with
business relations. Those claims require proof of causation, see Restatement (Second) of Torts
§§ 623A, 766B, and thus fail for the same reasons its statutory trade-disparagement claims did.
Medison also asserts conversion claims, but has produced no evidence that Preferred ever had
dominion or control over any of its property. Those claims therefore fail. See Restatement (Second)
of Torts § 222A(1). Medison’s fraud claims require evidence that Medison relied upon Preferred’s
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misrepresentations, see Restatement (Second) of Torts § 525, but Medison has no such evidence.
Hence those claims fail too.
Medison’s Tennessee-law claim for civil conspiracy requires proof that Preferred used a
“combination between two or more persons to accomplish by concert an unlawful purpose, or to
accomplish a purpose not in itself unlawful by unlawful means.” See Dale v. Thomas H. Temple
Co., 208 S.W.2d 344, 353 (Tenn. 1948). For the reasons already stated, Medison did not produce
admissible evidence creating a genuine issue that Preferred acted unlawfully in Tennessee. This
claim therefore fails.
That leaves only Medison’s claim under Mississippi Code § 75-24-5. Private actions under
that statute can be brought only by a “person who purchases or leases goods or services primarily
for personal, family, or household purposes and thereby suffers any ascertainable loss of money or
property” as a result of the alleged disparagement. Miss. Code Ann. § 75-24-15. Medison is not
such a person—it is a business—so this claim fails.
For each of Medison’s claims, therefore, it failed to produce admissible evidence creating
a genuine issue as to at least one element. Consequently, summary judgment was proper as to all
of them.
Finally, Medison contends that the district court improperly awarded the costs of litigation
to Preferred. Medison made no effort, however, to develop this argument in its brief. It has
therefore waived the issue. See Langley, 502 F.3d at 483.
The district court’s judgment is affirmed.
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